June 4, 2018, by Cecile Gutscher
G-6 plus one
The first round of talks between the wealthiest nations ended Saturday with participants in a fighting mood as a rift over trade widened into a chasm — and one of the biggest crises since the Group of Seven was formed. Finance ministers and central bank governors from Canada, France, Italy, Germany, the U.K., and Japan roundly condemned Donald Trump’s decision to impose tariffs on steel and aluminum, promising to retaliate unless he steps back. French Finance Minister Bruno Le Maire summed it up as “far more a G-6 plus one than a G-7.’’ China, meanwhile, is warning it will withdraw commitments it made on trade if the president carries out a separate threat to impose tariffs on the Asian country. The White House seemed unfazed as top economic adviser Larry Kudlow said the U.S. is seeking to redress decades of trade abuse.
Back to business
Two new European leaders were sworn in, concluding weeks of political turmoil. A political coup in Spain saw Socialist leader Pedro Sanchez assume office Saturday. In Italy, Giuseppe Conte, 53, a law professor with no political experience, was sworn in as prime minister on Friday in a compromise brokered by the two populist parties in power. Now the hard work begins: Italy’s anti-establishment Five Star Movement and the anti-immigrant League form an uneasy coalition catering to different constituencies with different priorities that will make delivering on electoral promises no small task. George Soros wrote in an Italian newspaper editorial over the weekend that tensions might boil over to the point that new elections are called later this year or early next year. At least the new leaders are likely to jump over the first hurdle: they’re expected to win a confidence vote in both houses of parliament as they’ve already agreed on the list of ministers and government program. In Madrid, Sanchez needs to appease anti-establishment Podemos and nationalist parties from Catalonia and the Basque region who helped him oust Mariano Rajoy.
With political ructions fading to the background, Italy’s UniCredit SpA was reported to be considering a merger with France’s Societe Generale SA, a move that would combine two of Europe’s largest financial institutions. In the U.S., Microsoft Corp. is set to announce it’s buying GitHub Inc. in a return to the company’s earliest roots and a sharp turnaround from where it was a decade ago. GitHub is a code-repository company popular with many software developers, whose tools form the origin for Microsoft’s story. A deal could be announced as soon as Monday.
Overnight, the MSCI Asia Pacific Index added 1.4 percent while Japan’s Topix index closed 1.5 percent higher. In Europe, the Stoxx 600 Index was 0.5 percent higher at 6:22 a.m. S&P 500 futures pointed to a gain at the open, the 10-year Treasury yield was at 2.92 percent and gold was a little higher.
Flying in the black
The airline business remains profitable, with global carriers set for net income of $33.8 billion in 2018, the industry’s main trade group said in a statement in Sydney. While that’s down from an all-time high of $38 billion made by airlines last year, it was hailed as an achievement following decades of bankruptcies. “At long last, normal profits are becoming normal for airlines,” Alexandre de Juniac, IATA’s director general and chief executive officer, said.