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ABU DHABI — Saudi Energy Minister Khalid Al Falih said on Tuesday he was "very optimistic" about the outlook for the oil market after producers cut output to support flagging prices.

Members of the Organisation of Petroleum Exporting Countries (OPEC) cartel and allies including Russia decided last month to reduce output by 1.2 million barrels per day (bpd) after prices fell by more than 40 per cent in just a few weeks in late 2018.

The price of benchmark Brent crude, which briefly dipped below $50 a barrel in November, rebounded partially to above $60 a barrel following the production cuts which took effect on January 1.

The market has remained volatile with prices fluctuating sharply even after OPEC kingpin Saudi Arabia announced last week it will gradually cut output by 800,000bpd in January and a further 100,000bpd next month.

"I am confident that the impact of the decision we took to cut output by 1.2 million bpd... will be very strong," Falih told reporters on the sidelines of the Abu Dhabi Sustainability Week conference.

"But there is always a lagtime between the [decision to] cut production and the impact reaching the market," he said.

Falih said he is confident that "within the next few weeks" the market conditions will return to normal and confidence will be restored.

"I am very optimistic," Falih said.

The Saudi minister also downplayed the impact of an expected global economic slowdown on the oil market.

"I am not ruling out a cyclical recession. I think we all know that these things are a fact of life," especially after a long expansionary period, Falih said.

"I just don't see it as a major shock to the global economy. Certainly, I don't see a big spillover into the oil market," he said.

Oil prices crashed in mid-2014 to below $30 a barrel, down from over $100 a barrel, because of a glut in supplies and weakening world demand.

That prompted the OPEC to cooperate with non-OPEC producers, mainly Russia, to trim output by 1.8 million bpd from the start of 2017.

After they abandoned the production cuts policy in mid-2018, oil prices dropped again.

But Falih said that the so-called OPEC+ group, which pumps 52 million bpd or 52 per cent of global output, is capable of rebalancing the market which has a surplus of around 300,000 to 400,000bpd.

"An adjustment by a half per cent does not appear to me to be a challenge," Falih said.

BEIJING — China's exports unexpectedly fell the most in two years in December, while imports also contracted, pointing to further weakness in the world's second-largest economy in 2019 and deteriorating global demand.

Adding to policymakers' worries, data on Monday also showed China posted its biggest trade surplus with the United States on record in 2018, which could prompt President Donald Trump to turn up the heat on Beijing in their bitter trade dispute.

Softening demand in China is being felt around the world, with slowing sales of goods from iPhones to automobiles, prompting warnings from the likes of Apple and from Jaguar Land Rover, which last week announced sweeping job cuts mostly in Britain.

The dismal December trade readings suggest China's economy may have cooled faster than expected late in the year, despite a slew of growth-boosting measures in recent months ranging from higher infrastructure spending to tax cuts.

Some analysts had already speculated that Beijing may have to speed up and intensify its policy easing and stimulus measures this year after factory activity shrank in December.

China's December exports unexpectedly fell 4.4 per cent from a year earlier, with demand in most of its major markets weakening. Imports also saw a shock drop, falling 7.6 per cent in their biggest decline since July 2016.

"Today's data reflect an end to export front-loading and the start of payback effects, while the global slowdown could also weigh on China's exports," Nomura economists wrote in a note, referring to a surge in shipments to the US over much of last year as companies rushed to beat further tariffs.

"The export growth print also suggests that the recent strength of the yuan might be short-lived; Beijing will perhaps be more eager to strike a trade deal with the US; and that policymakers will need to take more aggressive measures to stabilise GDP growth."

Net exports had already been a drag on China's economic growth in the first three quarters of last year, after giving it a boost in 2017.

Asian shares and US stock market futures fell as the surprisingly weak Chinese data added to fears of weaker corporate profits and investment, while the yuan currency gave up some of its early gains.

Higher trade 

surplus with US 

China's politically-sensitive surplus with the US widened by 17.2 per cent to $323.32 billion last year, the highest on record going back to 2006, according to Reuters calculations based on customs data.

China's large trade surplus with the United States has long been a sore point with Washington, which has demanded Beijing take steps to sharply reduce it.

Washington imposed import tariffs on hundreds of billions of dollars of Chinese goods last year and has threatened further action if Beijing does not change its practices on issues ranging from industrial subsidies to intellectual property. China has retaliated with tariffs of its own. 

However, Beijing's export data had been surprisingly resilient to tariffs for much of 2018, possibly because companies ramped up shipments before broader and stiffer US duties went into effect. 

As many market watchers predicted, that boost has faded in the last few months. China exports to the US declined 3.5 per cent in December while its imports from the US were down 35.8 per cent for the month.

China's total global exports rose 9.9 per cent in 2018, its strongest performance in seven years, while imports increased 15.8 per cent.

But December's gloomy data, along with several months of falling factory orders, suggest a further weakening in its exports in the near term.

"A trade recession is likely, in our view," Raymond Yeung, chief economist at ANZ, said in a note, predicting a period of export contraction similar to 2015-16.

"The global electronics cycle remains the key driver of Chinese exports. A potential downturn in the sector poses the real risk to China's external outlook even if China and the US reach a resolution on their trade dispute."

ING said a fall in electronic shipments could be related to foreign companies avoiding using China-made electronic components, adding that exports and imports of electronic parts and goods will likely shrink this year. 

Weak imports highlight sofening demand 

The higher tariffs China levied on US supplies also hit overall import growth. For all of 2018, soybeans, the second largest imports from the US, fell for the first time since 2011.

Even if Washington and Beijing reach a trade deal in their current round of talks, it would be no panacea for China's slowing economy, analysts say.

"The import slowdown is consistent with other signs that growth in China's domestic economy continued to weaken," said Louis Kuijs, head of Asia economics at Oxford Economics.

"Overall economic growth slowed further in the fourth quarter and remains under pressure from weaker exports, slow credit growth and cooling real estate activity."

Chinese policymakers are widely expected to roll out more support measures in coming months if domestic and external conditions continue to deteriorate.

Early this month, the central bank said it would slash banks' reserve requirements — the fifth such cut in a year — as it tries to encourage more lending and reduce the risk of a sharp slowdown.

"If pressure on the economy is still relatively large in the first half, a cut every quarter should be highly likely," said Xu Gao, chief economist at Everbright Securities. 

In an annual meeting of top leaders last month, China said it will boost support for the economy in 2019 by cutting taxes and stepping up policy adjustments.

A few analysts believe interest rate cuts are a possibility, but most expect Beijing will refrain from massive stimulus measures like those deployed in the past, due to worries that it could add to a mountain of debt and weaken the yuan. 

Sources told Reuters last week that Beijing is planning to lower its economic growth target to 6-6.5 per cent this year after an expected 6.6 per cent in 2018, the slowest pace in 28 years.

By Douglas Gillison

WASHINGTON — The US government shutdown on Saturday became the longest in history and is taking a growing bite out of the world's largest economy with each passing day, economists say.

While most of the 21 "lapses" in government spending since 1976 left barely a scratch on economic growth, the length of this shutdown makes it harder to say just how bad the impact could get.

"It's not a hard stretch to say that initially it's smaller and then it expands, the pain starts to widen," Beth Ann Bovino, chief US economist at S&P Global Ratings, told AFP. "Think of it as a butterfly effect."

With about a quarter of the federal workforce affected, the shutdown is currently squeezing an estimated $1.2 billion a week out of the economy, Bovino said, but that figure could grow if it drags on.

At the current rate, within two weeks it will have cost America more than the $5.7 billion US President Donald Trump is demanding for a wall on the border with Mexico, the dispute with Congress that led to the failure to pass funding for government operations.

Following extended closures in 1995 and 2013, the US economy continued to grow while stock markets mainly went sideways.

GDP growth lost in one quarter can rebound in the next as the government springs back to life and workers recoup lost salaries. But some losses can never be recovered.

In myriad but often unseen ways, the $4 trillion federal budget is felt in the daily lives of all Americans, well beyond the 800,000 government workers now going without pay — many of whom missed their first paychecks on Friday.

Switching off even a part of the government means that life force quickly begins to bleed away.

Payments to farmers and poor families, craft beer labels, food inspections and economic data all have fallen victim to the budget impasse. 

Meanwhile, tax refunds and borrower income verifications crucial to the mortgage industry were briefly up in the air with billions at stake.

"The tentacles start to touch many avenues of life and that's a very sad thing," Bovino said.

US coast guard cutters, their crews working without pay, on Monday began icebreaking at commercial ports in the frigid waters of Great Lakes near the Canadian border so local steel mills can remain supplied with iron ore.

Meanwhile, farmers cannot collect aid payments designed to help ease the pain caused by Trump's trade war with China.

Hurting the
poorest most 

Small Business Administration loans to help mom-and-pop businesses trying to invest, hire and grow have been delayed.

There are no government loans for seeds or cattle feed and none of the regular agriculture department data about crop yields and commodity prices that farmers depend on to plan for the coming year.

Permits from some oil and gas drilling — which feeds into GDP calculations — are delayed.

Bloomberg estimates that government contractors are losing $200 million a day, cutting revenues for defence industry giants like Boeing, General Dynamics and Leidos.

Tourism at the country's 400 national parks normally generates a reported $18 million a day, but with some parks unattended and many services halted, local restaurants, hotels and shops are losing customers.

Government assistance to feed the poorest Americans is funded through next month only.

None of this includes the hardships felt by the 380,000 federal workers who have been furloughed or the 420,000 who are deemed "essential" but are working without pay.

They owe an estimated $438 million a month in rent and mortgage payments, according to the real estate firm Zillow.

Around the Washington region, home to about 20 per cent of the federal work force, restaurants are sitting empty, taxis are idled and traffic increasingly moves with eerie ease along the capital's choked boulevards.

Yingrui Huang, an engineer for a defence contractor at NASA's Goddard Space Flight Centre in Maryland, told AFP his company is normally at work building weather satellites and telescopes for the government but is shuttered until further notice.

To fight boredom, he is now driving for the mobile ride hailing service Lyft but said he was most concerned hourly employees like janitors, cafeteria workers and secretaries.

"Their salaries are definitely lower than most of the engineering staff. They don't get the limelight. We don't think about them," he said.

Economic research on the last major shutdown in October 2013 found many federal workers were largely able to avoid sinking into debt — delaying mortgage payments and shifting balances between credit cards.

But that shutdown lasted for barely two weeks — one pay cycle — and lawmakers at the time had quickly promised workers would receive back pay.

"It's possible that the effects will be greater for this shutdown," University of Chicago economist Constantine Yannelis, who studied the 2013 shutdown, told AFP.

"The longer a shutdown lasts, the more persistent a change in habits you could see."

BERLIN — Germany’s antitrust watchdog plans to order Facebook to stop gathering some user data, a newspaper reported on Sunday.

The Federal Cartel Office, which has been investigating Facebook since 2015, has already found that the social media giant abused its market dominance to gather data on people without their knowledge or consent.

The Bild am Sonntag newspaper said the watchdog will present the US company with its ruling on what action it needs to take in the next few weeks. 

A Facebook spokeswoman said the company disputes the watchdog’s findings and will continue to defend this position.

The investigation is being closely watched amid mounting concerns over leaks of data on tens of millions of Facebook users, as well as the use of social media by foreign powers seeking to influence elections in the United States. 

The German watchdog objects in particular to how Facebook acquires data on people from third-party apps — including its own WhatsApp and Instagram services as well as games and websites — and its tracking of people who are not members.

The paper said it is still not clear how strictly Facebook will have to comply with the German order, noting that the watchdog looks likely to set a deadline for compliance rather than insisting on immediate action.

HARARE — Zimbabwe will introduce a new currency in the next 12 months, the country's finance minister said, as a shortage of US dollars plunges the financial system into disarray, forcing businesses to close and threatening unrest. 

The southern African nation abandoned its own hyperinflation-wrecked currency in 2009 at the height of an economic recession, adopting the greenback and other currencies including sterling and the South African rand.

But without enough hard currency to back up the $10 billion of electronic funds trapped in local bank accounts, businesses and civil servants are demanding payment in cash which can be deposited and used to make payments both inside and outside the country. 

Mthuli Ncube told a townhall meeting late on Friday that a new local currency would be introduced in less than twelve months.

"On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years," he said.

Zimbabwe currently has less than two weeks import cover, according to central bank data, and the government has previously said it would only consider launching a new currency if it had at least six months of reserves.

Locals are haunted by memories of the Zimbabwean dollar, which became worthless as hyperinflation spiralled to reach 500 billion per cent in 2008, the highest rate in the world for a country not at war, wiping out pensions and savings.

A surrogate bond note currency introduced in 2016 to stem dollar shortages has also collapsed in value.

President Emmerson Mnangagwa is under pressure to revive the economy but, in something of a vicious circle, the dollar shortages are undermining efforts to win back foreign investors sidelined under his predecessor Robert Mugabe.

With less than $400 million in actual cash in Zimbabwe according to central bank figures, there are fuel shortages and companies are struggling to import raw materials and equipment, forcing them to buy greenback notes on the black market at a premium of up to 370 per cent. 

The Confederation of Zimbabwe Industries has warned some of its members could stop operating at the end of the month due to the dollar crunch.

Zimbabwe's iconic manufacturer of cooking oil and soap, Olivine Industries said on Saturday it had suspended production and put workers on indefinite leave because it owed foreign suppliers $11 million. 

A local associate of global brewing giant Anheuser-Busch Inbev said this week it would invest more than $120 million of dividends and fees trapped in Zimbabwe into the central bank's savings bonds. 

BERLIN — More than 640 flights in Germany were cancelled on Thursday due to security staff strikes at Duesseldorf, Cologne and Stuttgart airports as workers sought to put pressure on management in wage talks.

Out of 1,054 scheduled flights in total, 643 were cancelled, the airports said, adding that many of their passengers would be affected, with significant delays at security checkpoints. An average of 115,000 passengers pass through the airports per day.

Public sector union Verdi said it was negotiating on behalf of 23,000 security workers in Germany. Wage talks are to resume on January 23, it said. The union has demanded a pay increase to 20 euros ($23.06) per hour before tax.

On Monday, a strike at Berlin's Schoenefeld and Tegel airports had caused delays and flight cancellations.

Around 1,000 security workers took part in the strike during the morning, Verdi said on Thursday, adding that the strike would continue until the end of the day.

"After five days of talks, the negotiations have come to a standstill... and that's why we thought it was necessary to make a move with these warning strikes today," Andrea Becker, a spokeswoman for the union said.

Christian Witt, one of the passengers stranded at Duesseldorf Airport, told Reuters: "You never understand when it affects you personally, but you have to see the bigger picture."

LONDON — A solid start from Europe kept world stocks at a three-week high on Tuesday after Asia was knocked back by a shock profit warning from tech giant Samsung and a tick-up in borrowing costs.

Hopes that Washington and Beijing may be moving towards a trade deal also helped the mood again and gave the dollar a lift in the currency markets after its weak start to the year.

That rise, along with the alarm from South Korea's Samsung that it would badly miss its earnings forecasts caused a swoon in emerging markets, but Europe held its nerve unlike last week after a similar warning from Apple.

The pan-European STOXX 600 rose 0.6 per cent, Britain's FTSE was up 0.5 per cent amid reports of a Brexit delay and Italian banks jumped almost 1 per cent as Rome stepped in to support another of its troubled lenders.

"I think the market has been quite extreme in pricing recession risks, so I think we have value now in both the equity and bond markets," SEB investment management's global head of asset allocation Hans Peterson said. 

"The discussions between the US and China will take some time but I think the markets are prepared to move in the right direction on positive signals". 

US Commerce Secretary Wilbur Ross predicted on Monday that Beijing and Washington could reach a trade deal that "we can live with" as dozens of officials from the world's two largest economies resumed talks in a bid to end their trade dispute.

On Wall Street, the S&P 500 had gained 0.7 per cent following 3.4 per cent surge on Friday, with Amazon.com and Netflix leading the recovery rally after a brutal end to 2018.

MSCI's broadest index of Asia-Pacific shares outside Japan reversed early gains, however, to end down 0.2 per cent. It was dragged lower by falls in South Korea due to Samsung and in China where government bond yields also saw their biggest daily gain in 9 months 

China's Foreign Ministry said Beijing had the "good faith" to work with the United States to resolve trade frictions, but many analysts doubt the two sides can reach a comprehensive agreement on all of the issues before a March deadline.

"Various concerns markets had earlier are receding for now. Still, there's no denying that US [company] earnings momentum is slowing," said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

"Ultimately we need to see whether upcoming earnings reports can dispel market concerns."

LONDON — World stocks went on the defensive on Monday, with profit-taking eroding European gains and Wall Street managing small gains after a spectacular rebound in the previous trading session.

There was some lingering optimism thanks to strong US jobs data and signs of slowing rate rises by the Federal Reserve (Fed), but investors viewed US-China trade talks with a dose of scepticism.

Earlier, Asian bourses rode high on Friday's Wall Street bounce but investors in Europe felt it was time to cash in on the rebound as their US counterparts seemed to have little firepower left.

"Stocks are still not out of the woods," said Fawad Razaqzqda, a market analyst at Forex.com.

If the forthcoming fourth quarter earnings season in the US produces "more misses than beats then the selling pressure could resume again", he said.

Chinese and US officials on Monday kicked off talks to find a solution to the trade war that has seen the two sides impose tariffs on hundreds of billions of dollars worth of goods.

But traders said there were no guarantees of progress in the talks.

Breakthrough 'unlikely' 

"Realistically, we are unlikely to see any form of tangible breakthrough in the immediate future, with issues such as the protection of intellectual property rights providing a major stumbling block that needs to be overcome," said Joshua Mahony, senior market analyst at IG. 

Friday's surge on Wall Street came after figures showed more than 300,000 US jobs were created in December, tempering recent concerns about growth.

Also Friday, Fed boss Jerome Powell said the bank had no "pre-set" plan for raising borrowing costs and was keeping a close watch on financial developments.

The news was music to the ears of traders, who have been fretting that the Fed would press on with its rate hike cycle, making it more expensive to borrow for investment.

China's move to make it easier for banks to lend also provided support to equities, traders said.

NEW YORK — After emerging market stocks led global equity markets lower in a brutal 2018, some US-based fund managers are betting that the asset class may have the largest rebound in the new year.

It may not look likely at the moment, given that an economic downturn in China prompted iPhone maker Apple Inc. to lower its quarterly revenue forecast on Wednesday for the first time in a decade. Its shares slumped nearly 10 per cent after Chief Executive Tim Cook blamed the US-China trade war and “economic deceleration”, prompting broad sell-offs around the world the following day.

Yet, fund managers from Westwood Holdings Group, GMO, T. Rowe Price and Causeway Capital Management are among those who are betting that emerging market stocks will post outsized gains in 2019. They cite a combination of compelling valuations and a likely decline in the value of the dollar that will help accelerate economic growth. 

As China continues to bear the brunt of US President Donald Trump’s focus on trade tariffs, fund managers are expecting that shares in countries like India, Thailand, Peru and Brazil will outperform the China-dominated emerging market benchmark index. 

“We want to lean into the fear in the markets,” said Sebastien Page, head of asset allocation at T. Rowe Price. He expects emerging markets will outperform in the year ahead as the Federal Reserve curtails its pace of interest rate hikes and the dollar subsides. 

“When you have a recovery in risk assets, those that have been undervalued can snap back the most,” he said. 

Emerging markets have been in a bear market since September, placing them already four months into the deep declines that rocked the US equities market in December. The average bear market in emerging markets has lasted 220 days and posted a decline of 32.4 per cent, or about 7 percentage points more than the roughly 25 per cent drop in the MSCI Emerging Market Index since it hit near-record highs last January, according to data from Ned Davis Research. 

While emerging markets started the year with another roughly 1.7 per cent loss over the first two trading sessions, fund managers say they are increasing their bets on stocks in countries that are among the most beaten-down, expecting they will have the largest rebound if and when a global bull market in equities resumes. 

“I’m actually a lot more positive than this time last year because there are tremendous opportunities to add to high-quality names in insurance and some banks,” said Patricia Perez-Coutts, portfolio manager of the Westwood Emerging Markets fund.

She has been increasing her stakes in South Africa, Thailand and Peru, she said, with the largest positions in companies such as South African life insurance company Sanlam Ltd. and Credicorp Ltd., Peru’s largest financial holding company. Shares of Credicorp are up 8.8 per cent over the last 12 months, while shares of Sanlam are down 3.9 per cent over the same time.

Perez-Coutts has been underweight on China since the start of last year, though she is starting to wade back in by buying shares in gaming and e-commerce companies that have plunged. 

“Though China’s overall economy may not be growing as strongly as it did in the past, there are still areas of strong growth,” she said. 

Joe Gubler, a quantitative portfolio manager at Causeway Capital Management, says emerging markets remain a compelling opportunity with a forward price-to-earnings ratio of approximately 10 even after the recent declines in the US market have pushed the forward price-to-earnings ratio of the S&P 500 to slightly below 15 for the first time in about five years. 

As a result, Gubler has been increasing his positions in small-cap companies in India, as well as energy companies that have sold off as the price of oil has tanked. He has also been increasing his position in companies that could benefit if there is a breakthrough in global trade talks. 

“The market is not in a mood to give emerging market stocks much credit,” he said. “If you look at the chart, the emerging market index is sitting at about the same place it was in 2009.

“If you had a let-up in trade and interest rates, you could see a decent-sized rally.” 

WASHINGTON/BEIJING — President Donald Trump on Friday downplayed a revenue warning by Apple Inc. and said slowing economic growth in China puts the United States in a strong position as negotiators from the world's two largest economies prepare for trade talks next week.

Trump has slapped import tariffs on hundreds of billions of dollars of Chinese goods as he seeks concessions from Beijing on issues ranging from industrial subsidies to hacking. China has retaliated. The tit-for-tat tariffs have disrupted trade, hurt manufacturing, roiled international markets and slowed the global economy.

US officials are heading to Beijing next week for the first face-to-face talks since Trump and President Xi Jinping in December agreed to a 90-day truce in the trade war as they sought to strike a deal.

"I think we will make a deal with China," Trump told reporters at the White House after a meeting with Democratic and Republican lawmakers. "I really think they want to. I think they sort of have to."

Beijing on Friday cut bank reserve requirements for a fifth time this year amid slowing growth at home and punishing US tariffs on exports.

Official data this week showed manufacturing has slowed in both China and the United States. Trump, who last month called himself "Tariff Man", has said he wants a deal but that he would impose more tariffs if China failed to cede on key US demands.

Trump downplayed the effects of the economic woes on US technology giant Apple Inc., which this week blamed slowing iPhone sales in China behind a rare reduction in its quarterly sales forecast. 

When asked if he was concerned about Apple's share price, he said: "I'm not. I mean look, they've gone up a lot."

Shares of Apple closed at $148.26 apiece on Friday, down about 5.1 per cent this week. Apple shares fell 7 per cent in 2018 but are still up about 24 per cent since Trump took office in January 2017.

Apple's outlook revision along with a double-digit drop in earnings at commodities giant Cargill Inc. on Thursday may be among the clearest warning signs yet that the trade war's effects have begun to hit US companies.

Meeting

A team led by Deputy US Trade Representative (USTR) Jeffrey Gerrish will travel to China for talks, China's commerce ministry said in a statement on its website on Friday, news that helped boost global markets.

The USTR said separately that the delegation would also include undersecretaries from the US departments of agriculture, commerce, energy and treasury, as well as senior officials from those agencies and the White House.

While Trump and other officials have said talks between the two sides are progressing well, they have given no details on concessions that China has made. Some US demands would require structural reform that may be unpalatable for Chinese leaders.

China would deepen reform but will not yield on issues it deems to be its core national interests, a commentary in the ruling Communist Party's official newspaper said on Wednesday. 

"We know what sort of changes we need," White House Economic Adviser Larry Kudlow said in an interview with Fox Business on Friday. "Now, the question is can we negotiate these changes and can we do so with enforcement [and] with timetables."