Bank of Canada hold rates steady as Canada awaits Trump

The Bank of Canada opted Wednesday to keep its trend-setting interest rate at 0.5 per cent.

In a statement, the central bank said while “uncertainty” continues for the global economy as a whole, the forecast for Canada’s largest trading partner, the U.S, is looking up — something that could imply a rate hike down the line.

The Bank of Canada, led by Stephen Poloz, generally hikes rates when it is trying to pump the brakes on a hot economy and tame inflation, and cuts rates when it wants to stimulate the economy.

The bank cut its benchmark interest rate twice in 2015 before standing on the sidelines through 2016.

Forecasting the Trump effect

The bank is also beginning to calculate the impact of the impending Trump administration into its forecasts of Canada’s economic future.

The Bank of Canada, led by Stephen Poloz, elected to keep its benchmark interest rate steady at 0.5 per cent on Wednesday. (Justin Tang/Canadian Press)

In its Monetary Policy Report, also released Wednesday morning, the bank projected Canadian GDP growth of 2.1 per cent in 2017, a slight upwards revision from its previous projection.

That growth outlook includes an assumption that Donald Trump’s expected stimulus to the U.S. economy “boosts demand for Canadian exports and supports business confidence in Canada.”

“This positive effect is, however, tempered by a deterioration in Canadian competitiveness related to assumed corporate tax cuts in the United States,” said the report.

At this point, the bank is not including in its forecasts the possibility that protectionist U.S. trade policy under Trump, when he becomes president, could harm the Canadian economy, although it warned that such protectionism could have “material consequences for Canadian investment and exports.”

Trump as job creator — reality or just reality TV with lots of spin?

President-elect Donald Trump hasn’t even started his new job yet. But he’s already been busy creating lots of jobs, particularly in the auto sector. At least that’s what his tweets imply.

Just yesterday, he took to Twitter to boast about “all of the jobs I am bringing back into the U.S. (even before taking office)” and “all of the new auto plants coming back.”

Industry insiders say many of the jobs that Trump is taking credit for were already in the works and had nothing to do with him.

To critics, Trump is playing a masterful game, but so too are some companies. After he blasted automakers on Twitter for outsourcing jobs to Mexico, a number of them publicly announced previously planned investments in U.S. plants.

“The companies are finding ways to package decisions that they would have made anyway in ways that are appealing to Mr. Trump and that helps them,” says Mark Phelan, auto critic with the Detroit Free Press.

Trump then joins the show on social media where he can put his own spin on the announcements. 

“What you’re seeing is a president-elect with an enormous influence and a direct channel, using that to stage-produce his own story,” says Ronald Alepian, senior vice-president of communications with National Public Relations in Toronto.

“It is a reality show, it is a well-orchestrated production.”

The Apprentice, the reality TV show hosted for many years by Trump, introduced millions of Americans to the flamboyant self-promoter. (Ric Francis/Associated Press)

Trump stars as job creator

Trump’s most recent tweet about job creation follows announcements by both GM and Hyundai yesterday that they’re pouring more cash into U.S. plants.

But both automakers have reportedly stated that their plans aren’t tied to Trump’s recent rants about shifting production to Mexico.

“These are the kind of investments that they make on a routine basis,” says Michelle Krebs, a Detroit-based senior analyst with Autotrader.

GM CEO Mary Barra said last week at the Detroit auto show that when auto manufacturers make new production plans, it’s a long, drawn-out decision — one that would precede the recent U.S. election.

“This is a long-lead business with investment decisions made two, three, four years in advance of when they actually roll out,” she said.

And yet Trump has continued to take credit for recent U.S. auto announcements while auto companies, eager to avoid his wrath, have quietly let him do it.  

A United Auto Workers assemblyman works on the Ford Mustang at the Flat Rock Assembly Plant in Flat Rock, Mich. (Carlos Osorio/Associated Press)

Earlier this month, Ford stated it was dropping plans to build a new U.S. plant in Mexico and will add 700 jobs at a Michigan factory to build high-tech vehicles.

Trump had repeatedly blasted the company for moving production out of the U.S. Following Ford’s announcement, Trump implied that he was behind the new jobs that appeared to come as a result of the automaker’s decision to ditch its latest expansion plans in Mexico. 

“Mr. Trump spoke of it in glowing terms as if it was a reversal of policy and leads to bringing jobs back to the United States,” says Phelan.

But Ford stated in a news release that the vehicle production slated for the scrapped Mexican plant will simply be moved to an existing one — in Mexico.

In other words, says Phelan, “those jobs will not be coming to America.”

The show must go on

But Trump’s “reality show” about job creation continued. On the heels of Ford’s news, Fiat Chrysler also announced that it would expand some of its U.S. factories, creating 2,000 more jobs.

That prompted Trump to suggest once again that he was somehow involved, thanking Ford and Fiat Chrysler as though they had done him a personal favour.

But at the Detroit auto show, Fiat Chrysler’s CEO stated that Trump had not influenced its plans, which had been in the works since 2015.

“It wasn’t sort of a pre-emptive strike against a tweet,” said Sergio Marchionne.

In Trump’s version of events, he also “worked hard” to prevent a Ford Kentucky auto plant from moving to Mexico. But critics say the plant was never in jeopardy of closing.

Phelan says Ford had instead cancelled a plan to move some production overflow at the plant to Mexico, deciding it wasn’t necessary. The decision “had nothing to do with Trump,” he says.

But according to Trump, his job creation powers spread across the auto industry and beyond. 

He also recently took credit for 8,000 new jobs announced last month, 5,000 with wireless carrier Sprint and 3,000 with satellite company OneWeb. But numerous reports claim, once again, that the jobs were part of a previously disclosed pledge by Japan’s SoftBank Group, which holds stakes in both U.S. companies. 

When Trump becomes president this week, one can only expect that he will continue to take credit for jobs that he didn’t necessarily have anything to do with.

Companies may then quietly reveal the true details. And, yet, the show will presumably go on, because, when Trump tweets the news, he gets to write his own script for a performance that everyone is watching.

“We are all part of a reality show or a production where he is the writer and the producer and the director,” says Alepian, the public relations expert.

O’Leary makes it official: He’s running to be federal Conservative leader

It’s finally official: Kevin O’Leary will run to become leader of the Conservative Party of Canada.

After months of flirting with the idea, he picked the morning after the French leadership debate and used a video on his Facebook page to declare his candidacy.

“You know why? I listened to you,” he said in the video posted Wednesday, thanking the “40,000” Canadians he said went to his website and encouraged him to enter the race.

“What an opportunity we have in this country. Limitless bounty,” he said. “Such opportunity to turn it around. I’m so excited. It’s time.

“The potential of this country is absolutely immense. It’s just really mismanaged,” he said.

O’Leary, 62, joins the contest months after it started. Three of the 13 other candidates made their candidacies official last spring, and will have been organizing for over a year by the time the vote is held May 27.

O’Leary’s campaign must now scramble to catch up in the space of a few months. But his television programs have already made him a household name across Canada.

Avoided French debate

Waiting until Wednesday morning meant O’Leary was not required to participate in the party’s French-only debate, held last night in Quebec City.

The 13 other candidates — many of whom, like O’Leary, aren’t bilingual — were forced to answer eight questions entirely in French at an event where no translation was provided.

O’Leary has been critical of the debate formats the party is using in the race, and said he wouldn’t participate in the French debate “out of respect for Quebec and French-Canadians.”

Once he files his papers and pays the required deposit, however, he’s required to attend the final two bilingual debates. The next one is in Edmonton on Feb. 28.

Those wishing to vote for the next Conservative leader in May have until late March to purchase a party membership. The final deadline for any other candidates to enter the race is Feb.24.

How Tehran sees Trump: Get-rich guru gets another look as antagonistic U.S. president-elect

A short drive from Tehran’s imposing “Down with the U.S.A.” mural and a dash from the towering depiction of Barack Obama as a villain, a small bookstore is doing a brisk business selling books by Donald Trump.

On the display window outside, a white sheet of paper declares the “Trump books have arrived.”

Inside, a modest stand is half full of copies of Why We Want You to be Rich, which has a young-looking Trump on the cover.

Outside a bookstore in Tehran, a sheet of paper announces the ‘Trump books have arrived.’ (Nahlah Ayed/CBC)

No single mural or isolated scene from a bookstore can sum up the complex range of sentiments people here have about their country’s longtime nemesis, the United States.

It’s equally difficult to pin down a common view of the rival country’s antagonistic and swaggering president-elect, especially because so many people here prefer to refrain from talking politics with foreign journalists.

Buying Trump books

But in the weeks leading up to Trump’s inauguration as the 45th president, there appears to be a surge of curiosity about him.

“People come in looking for books on Donald Trump — like an autobiography,” says Ali, a sales clerk at the bookstore who didn’t wish to be identified beyond his first name.

Instead, what customers find are Trump books translated into Farsi with titles like Think Big and Think Like a Billionnaire.

Two more of Trump’s get-rich books for sale in Tehran. (Nahlah Ayed/CBC)

“We always have to explain to these people that [Trump] has also been a successful business person … and gives guidelines on how to become rich,” Ali says.

And so in the absence of a biography, a publisher recently reprinted Why We Want You to be Rich to meet the rising demand.

‘One of the worst deals ever’ 

Beyond being known for his motivational tomes and his new powerful role, what puts Trump on the front pages here is his repeated criticism of the deal Iran signed with world powers in 2015 to curb its nuclear activities in exchange for the removal of sanctions.

Trump has said he plans to tear up the agreement, which also counts Russia, China, Britain, France and Germany among its signatories.

In comments this week to European publications, Trump didn’t go quite that far, but said he still believes the agreement is “one of the worst deals ever made.”

“I think it’s one the dumbest deals I’ve ever seen,” he said.

Those comments landed him on at least one front page here Tuesday. And lingering division over the deal seemed to determine how his comments were received.

They have rattled the deal’s proponents, including U.S. President Barack Obama, as well as Iranian President Hassan Rouhani, one of its chief architects.

Iranian President Hassan Rouhani dismissed Trump’s criticism of the nuclear deal as ‘slogans.’ (Charles Platiau/Reuters)

Rouhani dismissed Trump’s commentary on the deal Tuesday as mere “slogans” and said Trump doesn’t have the authority to unilaterally cancel the agreement.

“This isn’t a bilateral deal,” he said in a press conference marking the first anniversary of the lifting of sanctions under the Joint Plan of Action (JCOA).

“It is a multilateral agreement. So it is meaningless and senseless to once again talk and negotiate regarding nuclear issues.”

But in a country where hardliners label the U.S. the devil, there are certainly competing views about the deal.

An Iranian woman walks past an anti-U.S. mural painted on the wall of the former U.S. Embassy in Tehran. (Raheb Homavandi/Reuters)

At a time when the nuclear deal’s dividends are still just trickling in, Trump’s tough talk resonates with its critics here and those who oppose rapprochement with the West, however circumscribed.

It also resonates with those who believe the deal was already being undermined under Obama, says Prof. Seyed Mohammad Marandi, a professor of American studies and English literature at the University of Tehran who was born in Richmond, Va.

“So some people are saying, ‘Well, if [Trump] scraps the deal then at least Iran’s hands are no longer tied,'” says Marandi.

“Others are saying maybe he is going to be more pragmatic about the region and therefore he may be more pragmatic towards Iran and want the deal to work.”

For the hardliners — in the political establishment and general public alike — more comfortable with an acrimonious relationship with the U.S., a Trump presidency, on the eve of Iran’s own presidential elections, is a serendipitous gift.

An anti-U.S. mural in Tehran. (Marius Bosch/Reuters)

The uncertainty around Trump is a source of personal concern for some Iranians, such as students hoping to study in the U.S. or those who have family there. A young man we spoke to at a news stand who did not wish to be identified said his relatives in the U.S. have experienced increased harassment and racism since Trump’s election.

And then there are those with wider concerns like caricaturist Keyvan Varesi, who says he’s worried Trump poses a danger to the world.

Varesi says Iranians ‘need the peace’ that comes with the nuclear deal. (Nahlah Ayed/CBC )

Varesi is concerned about the fate of the nuclear deal and says Iranians “need the peace that comes with it.”

But he’s also troubled, he says, because “the whole world is like a village and it’s facing some common problems, like global warming and unrest in the Middle East.”

That’s why in his latest caricature he drew Trump wearing a pin of the Earth on his lapel. The president-elect is depicted as the Joker, an agent of chaos and arch enemy of Batman.

Here’s a photo of Varesi’s cartoon of Trump as the Joker. (CBC)

It’s how Varesi imagined American artists would see Trump.

“Mr. Trump,” he said, “as [leader of] one of the most influential countries in the world, can lead the world towards war or towards peace.”

Trump administration will press Canada, Mexico to reopen NAFTA

The man U.S. president-elect Donald Trump has tapped to reshape the country’s trade policy will soon send a letter to Canadian and Mexican officials urging them to reopen NAFTA talks, according to a report.

The Globe and Mail says Wilbur Ross will want to discuss country of origin rules and the independent dispute-settlement mechanism that are key features of the 1994 free trade agreement.

Ross is under questioning on Wednesday by U.S. lawmakers at his confirmation hearing for secretary of commerce, and was asked from the outset about his views on trade with Canada and Mexico.

“NAFTA is logically the first thing for us to deal with,” Ross said. “We ought to solidify relationships in the best way we can in our own territory before we go off to other jurisdictions,” Ross said, referring to China, a frequent target of Trump’s ire for allegedly unfair trade practices.

Ross said U.S. trading partners who play by the rules should have nothing to fear from a Trump administration, as on the whole, the U.S. is in favour of more global trade — not less.

“I think we should grant access to our markets to anyone who plays fair, plays by the rules and gives everybody a fair chance to compete,” he said.

“I am not anti-trade, I am pro trade,” Ross said. “But I’m pro sensible trade.

“I’m opposed to trade that is against the interests of the American worker and the American manufacturing industry.”

Ross’s comments on NAFTA were interrupted by protesters who were shouting their opposition to the Trans Pacific Partnership — a trade pact initiated under the current administration but one that has drawn criticism from president-elect Trump.

“That was not part of my prepared remarks,” Ross quipped of the prostesters who interrupted his comments.

Trudeau vows to ‘defend’ trade benefits

Speaking in Sherbrooke, Que., on Wednesday, Canadian Prime Minister Justin Trudeau was asked about trade issues with the incoming U.S. administration.

“We’ve been engaged with the incoming administration over the past few weeks on a broad range of issues and we’re working hard to move forward in a constructive way that’s going to benefit both of our countries,” Trudeau said.

“A constructive working relationship in which we engage in talks about how to move forward is exactly what we’ve been focused on and what we will continue to focus on when the new administration comes into place,” he added.

“We’re going to defend the benefits of trade and openness to Canadians.”

BAT agrees to buy Reynolds for $49 billion


LONDON British American Tobacco (BATS.L) has agreed a $49.4 billion takeover of U.S. rival Reynolds American Inc (RAI.N), creating the world’s biggest listed tobacco company after it increased an earlier offer by more than $2 billion.

BAT, which already owned 42 percent of Reynolds, will pay $29.44 in cash and 0.5260 BAT shares for each Reynolds share, it said, a 26 percent premium over the price of the stock on Oct. 20, the day before BAT’s first offer was made public.

Reynolds, the maker of Camel and Newport cigarettes, rejected an initial approach in November, although the two sides remained in talks.

The deal, which values the whole of Reynolds at around $86 billion, will mark the return of BAT to the lucrative and highly regulated U.S. market after a 12-year absence, making it the only tobacco giant with a leading presence in American and international markets.

BAT Chief Executive Nicandro Durante said bringing the two companies together would create a market leader with brands including Newport, Lucky Strike, Camel and Pall Mall.

“It will create a stronger, global tobacco and NGP (next generation products) business with direct access for our products across the most attractive markets in the world,” he said on Tuesday.

The U.S. tobacco market was the most profitable outside China, he said in an interview, and BAT “figured there was some room to grow there.”

BAT left the United States in 2004 when it merged its subsidiary Brown Williamson with R.J. Reynolds to form Reynolds American in 2004. A decade later, the U.S. group agreed to buy Lorillard in a $27.4 billion deal that added the Newport brand to its stable.

Durante said there was a clear rationale to bring the groups together, and an alignment in their relative trading multiples made an agreement possible.

“This is the right moment to make the deal; the multiples of BAT and Reynolds are closer than ever before,” he said.

BAT would also be able to take Reynold’s NGP portfolio, led by vaping brand Vuse, into its international markets, he said.

IGNITING THE MARKET

The takeover could spark further deals, analyst have said, as Philip Morris International (PM.N) and Japan Tobacco (2914.T) jostle for market share in an industry that is shrinking in the West as more people quit smoking.

“The sheer scale of the enlarged BAT raises the pressure on the remaining players to bulk up too, and attention is likely to turn to Britain’s Imperial Brands (IMB.L), who look more and more like a minnow swimming in a tank of big, hungry fish,” said Hargreaves Lansdown fund manager Steve Clayton.

Some have predicted the deal could encourage current market leader Philip Morris International to reunite with its U.S. affiliate Altria, reversing a 2008 spin-off.

Shares in BAT reversed early gains as investors fretted about the price BAT was paying and the debt it was taking on.

BAT said it had agreed a $25 billion facility with a consortium of banks.

BAT shares were down 3.8 percent at 45.80 pounds, below the level in October before the company announced its approach. Reynolds’ stock was trading up 3.1 percent at $57.72.

RBC Capital Markets said assuming BAT was able to achieve the annual cost savings of “at least $400 million” it has targeted, the deal would be financially neutral for BAT shares.

“We think (the deal) makes sense strategically and operationally and just about washes its face financially,” it said. “That said, a value-neutral acquisition does little to alter our view that the shares are already reasonably valued.”

BAT Fiance Director Ben Stevens told analysts the group now had a “lot more certainty” on the cost savings. “We hope that as we get closer to Reynolds we will find more cost savings than that,” he said.

Centerview Partners, Deutsche Bank and UBS advised BAT on the deal, while Lazard, JP Morgan and Jones Day worked for Reynolds American.

(Reporting by Paul Sandle; Editing by Mark Potter and Susan Thomas)

U.S. lobby says China protectionism fueling foreign business pessimism


BEIJING More than 80 percent of members of a U.S. business lobby in China say foreign companies are less welcome than in the past, a survey released on Wednesday showed, with most saying they have little confidence in China’s vows to open its markets.

The American Chamber of Commerce in China’s annual survey reinforces growing pessimism in the foreign business community, as it grapples with a slowing Chinese economy and complains of increasing protectionism.

The chamber’s report comes a day after China’s President Xi Jinping gave a speech at the World Economic Forum championing open markets, and Beijing unveiled proposals to reduce restrictions on foreign investment in China.

Business circles are particularly concerned over the future of U.S.-China commercial ties as President-elect Donald Trump prepares to take office, having pledged to brand China a currency manipulator and threatened to impose tariffs on its goods.

“More companies are slowing investments and deprioritizing China as an investment destination due to slowing growth and increased concerns over barriers to market entry, the regulatory environment, and rising costs,” the chamber said.

If China took action, including removing “discriminatory barriers” to foreign-invested companies and investment restrictions, the chamber’s members would “significantly increase investment”, it said.

Asked about the report, Chinese Foreign Ministry spokeswoman Hua Chunying said investment figures showed China remained an attractive place for U.S. businesses and China was committed to opening up.

“At the same time, we hope that the doors of all countries are fairly opened to Chinese investors,” Hua told a daily news briefing.

LACK OF CONFIDENCE

The chamber said the share of companies that identified China as a top three global investment priority dropped to 56 percent this year, compared with a peak of 78 percent in 2012, a record low.

Eighty-one percent of the 462 companies included in the survey, among them U.S. and multinational firms, said foreign business was less welcome in China than in the past, up from 77 percent in 2016.

Foreign businesses in China, as well as foreign governments, have long complained about a lack of market access in China and restrictive policies that run counter to its pledges to free up markets.

Though President Xi’s speech at the World Economic Forum in Davos painted a picture of China as a “wide open” economy, more than 60 percent of the chamber’s members had “little or no confidence that the government is committed to opening China’s markets further in the next three years”.

Respondents estimated on average that China’s economic growth for 2017 would be 6.1 percent, below what sources have told Reuters would be a government target of around 6.5 percent.

The survey, with responses compiled both during and after Trump’s November election victory, showed 72 percent of members felt that positive U.S.-China relations were “critical” to business, but only 17 percent thought they would improve in 2017.

Chamber chairman William Zarit said some of its members would go to Washington in February, months ahead of an annual lobbying trip, to engage with the Trump administration.

“We certainly are not going there to lecture the administration, but we are there to share our ideas on … a more constructive path forward,” Zarit said at a briefing on the survey.

China has warned that it will be tough for its foreign trade to improve this year, especially if a Trump administration and other political changes limit export growth.

(Additional reporting by Ben Blanchard; Editing by Robert Birsel)

Oil rises on weaker dollar, U.S. production outlook caps gains


SINGAPORE Oil prices rose on Wednesday with a weaker dollar underpinning the market, although gains were limited by expectations that U.S. producers would boost output.

U.S. West Texas Intermediate (WTI) crude oil futures were trading up 22 cents at $52.70 per barrel at 0742 GMT.

Brent crude futures, the international benchmark for oil prices, were up 23 cents $55.70 a barrel.

The dollar was trading near its lowest in six weeks against a basket of currencies after U.S. President-elect Donald Trump said that the strong greenback was hurting U.S. competitiveness.

A weaker greenback makes dollar-denominated crude less expensive for users of other currencies, potentially spurring fuel demand.

“U.S. oil has been supported by considerable weakening in the U.S. dollar over the last 24 hours,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“There are two or three key things to watch, U.S. production numbers are important, given the sharp rise we have seen in output. Another issue on the supply side is any news on OPEC countries unwinding their production.”

Oil has drawn support from top crude exporter Saudi Arabia, which said it would adhere strictly to its commitment to cut output under the agreement between the Organization of the Petroleum Exporting Countries (OPEC) and other producers.

Under the agreement, OPEC, Russia and other non-OPEC producers have pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption.

The output cuts agreed by OPEC and others are likely to come largely from field and refinery maintenance, BMI Research said in a note. It said oil producers are expected to use lower volumes needed for domestic power generation in a bid to maintain export volumes.

“Sticking to output targets is important but export volumes from the participating countries are a much better indicator of how the cuts will affect the market,” it said.

“Participating members are keen not to sacrifice vital export revenue so are trying to find ways to limit domestic crude usage in order to prioritize filling their contracts to foreign refiners.”

At the same time, U.S. oil production is set to rise towards 9 million barrels per day, the U.S. government said on Tuesday, providing headwinds to oil futures.

Representative Ryan Zinke of Montana, President-elect Donald Trump’s nominee for interior secretary, on Tuesday said he would consider an expansion of energy drilling and mining on federal lands but would ensure sensitive areas remain protected.

(Reporting by Naveen Thukral; Editing by Kenneth Maxwell and Amrutha Gayathri)

Deutsche Bank sees fourth quarter pretax impact of $1.2 billion from DoJ civil penalty


FRANKFURT Deutsche Bank (DBKGn.DE) expects a negative impact of $1.2 billion on its fourth-quarter pretax profit from a civil monetary penalty of $3.1 billion agreed with the U.S. Department of Justice, its chief executive said in a message to staff.

Germany’s biggest bank on Tuesday finalised a $7.2 billion settlement with the DoJ over its sale of toxic mortgage securities in the run-up to the 2008 financial crisis, which also included $4.1 billion of consumer relief.

“Given other lawsuits, it is still too early to talk of having drawn a line under all matters,” John Cryan wrote.

“We are, however, nearing our objective of being able to concentrate primarily on the future instead of repeatedly having to look over our shoulders at past events.”

(Reporting by Georgina Prodhan; Editing by Himani Sarkar)

Asia stocks hover near three-month highs; sterling in spotlight


HONG KONG Asian stock markets stabilized near three-month highs on Wednesday, helped by Hong Kong and Chinese shares, as investors judged U.S. President-elect Donald Trump’s concerns over a stronger dollar to be beneficial to some of the regional bourses.

Short-covering also helped, especially in China .SSEC, which tumbled more than 4 percent last week, as traders took some money off the table before Trump’s inauguration on Friday.

In Asia, MSCI’s ex-Japan Asia-Pacific shares index .MIAPJ0000PUS rose 0.4 percent, just shy of a three-month high hit last Thursday. Energy and cyclicals were the chief gainers.

The firmness in Asia is expected to extend to Europe with stock futures in key European markets pointing to a higher start.

“Trump’s comments on the dollar has helped relieve downward pressure on the renminbi and on Chinese equities and we have seen a steady pick up in capital flows from mainland investors into Hong Kong stocks,” said Alex Wong, a portfolio manager at Ample Capital with $100 million in assets under management.

By midday, Hong Kong stocks poked above a key resistance level around 23,000 which if successfully breached would position the market for further gains, according to analysts.

Moreover, capital flows via the Shanghai and the Shenzhen connect programs have flipped decisively in favor of Hong Kong stocks in recent days, indicating mainland investors are gradually turning bullish over the broader market outlook.

While investors have become somewhat optimistic on the outlook for Asian equities in the past two weeks – prompting regional markets to outperform developed market peers, underlying caution remains due to China concerns.

Gene Frieda, a portfolio manager at bond giant PIMCO, wrote in a note that though Chinese economic growth looked stable into early 2017, a more marked slowdown by the second quarter “appears inevitable” amid the backdrop of ever-increasing debt.

In currency markets, the British pound consolidated gains on Wednesday after posting its biggest rise in nearly two decades in the previous session.

Sterling’s GBP=D4 rally was triggered after Prime Minister Theresa May promised a parliamentary vote on Britain’s deal to leave the EU and sought to draw a line under discussion of a “hard” or “soft” Brexit.

It was trading at 1.2331 against the dollar, giving back some of its near 3 percent gains scored in the previous session. That was the biggest climb since 1998, according to Thomson Reuters data..

“Markets cannot be too optimistic about the UK parliament having the final vote. Brexit, hard or not, will weigh on the UK economy,” said Masashi Murata, currency strategist at Brown Brothers Harriman.

The dollar’s recent weakness deepened after President-elect Donald Trump said the greenback’s strength against the Chinese yuan “is killing us.”

The dollar was trading at 100.62 against a broad trade-weighted basket of its peers =USD and is down nearly 3.5 percent from a near 15-year peak of 103.82 hit on Jan. 3. Against the Japanese yen JPY= it was changing hands at 113.32

The dollar’s renewed weakness put a floor under some Asian currencies which have been punished by investors such as the Chinese currency traded in the offshore market CNH=D3, and has helped attract flows into some markets like Korea.

With doubts growing about the sustainability of the “Trump trade” – higher stocks and stronger dollar – safe-haven assets glittered. Gold XAU= was perched comfortably at a two-month high above 1215 dollars per ounce. It is up nearly 8 percent in the last three weeks.

Bond markets also doubted Trump’s stimulus policies with the spread between ten and two year U.S. debt – an indicator of interest rate expectations – tightening by around 20 basis points over the past month.

Oil prices were locked in a tight range, with benchmark Brent futures LCOc1 steady at $55.67 per barrel as a decline in the dollar offset forecasts that U.S. and Russian producers would boost output later this year.

(Additional reporting by Yuzuha Oka in TOKYO; Editing by Eric Meijer Shri Navaratnam)