Tag Archives: Economy

Wall Street rises with help from technology, financial, energy stocks

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S.,

By Sinead Carew

(Reuters) – The S&P 500 and the Nasdaq notched record closing highs on Monday, powered by demand for technology stocks after a global cyber attack and by rising oil prices.

Oil rose to the highest level in more than three weeks after top exporters Saudi Arabia and Russia said supply cuts needed to last into 2018, a step toward extending an OPEC-led deal to support prices for longer than originally agreed.

The rising oil prices and housing data drove optimism about the economy and helped make financial stocks <.SPSY> the second biggest driver for the S&P 500, behind the technology sector.

“The oil markets are acting well and that’s helping,” said R.J. Grant, head of trading at Keefe, Bruyette & Woods in New York, who also cited the strong corporate earnings season.

About 75 percent of S&P 500 companies that have reported quarterly results so far have beaten Wall Street expectations, according to Thomson Reuters data.

While data for New York state’s manufacturing sector was weaker than expected, U.S. homebuilder sentiment gave investors some confidence in the economy.

“We need that because there’s been a tug-of-war in this market as to whether this economy is peaking,” Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey, said, referring to the housing sentiment.

The Dow Jones Industrial Average was up 85.33 points, or 0.41 percent, to the S&P 500 gained 11.42 points, or 0.48 percent, to 2,402.32 and the Nasdaq Composite added 28.44 points, or 0.46 percent, to 6,149.67. Johnson & Johnson & and Cisco Systems were the biggest drivers for the S&P 500 after prominent analysts upgraded their ratings on the stocks.

Shares of cyber security firms jumped on expectations that they would benefit from greater spending after the global “ransomware” attack that began spreading across the globe on Friday. Shares of Fireye rose 7.5 percent, and Symantec and Palo Alto Networks  both gained around 3 percent. The 2.3 percent rise in Cisco was driven in party by its security technology business.

Nine of the 11 major S&P 500 sectors closed higher, with the materials index leading the percentage gainers.

Advancing issues outnumbered declining ones on the NYSE by a 3.10-to-1 ratio; on Nasdaq, a 2.04-to-1 ratio favored advancers.

The S&P 500 posted 46 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 144 new highs and 53 new lows.

About 6.3 billion shares changed hands on U.S. exchanges on Monday compared with the 6.8 billion average for the last 20 sessions.

(Additional reporting by Caroline Valetkevitch in New York, Tanya Agrawal in Bengaluru,; Editing by Alistair Bell and Leslie Adler)

China says all welcome at Silk Road forum after U.S. complains over North Korea

Chinese Premier Li Keqiang meets Uzbek President Shavkat Mirziyoyev at the Great Hall of the People in Beijing, China, May 13, 2017. REUTERS/Thomas Peter

By Ben Blanchard

BEIJING (Reuters) – China welcomes all countries to a forum this weekend on China’s new Silk Road plan, the foreign ministry said on Saturday, after the United States warned China that North Korea’s attendance could affect other countries’ participation.

Two sources with knowledge of the situation said the U.S. embassy in Beijing had submitted a diplomatic note to China’s foreign ministry, saying inviting North Korea sent the wrong message at a time when the world was trying to pressure it over its repeated missile and nuclear tests.

The disagreement over North Korea threatens to overshadow China’s most important diplomatic event of the year for an initiative championed by President Xi Jinping.

Asked about the U.S. note, the foreign ministry said in a short statement sent to Reuters that it did “not understand the situation”.

“The Belt and Road initiative is an open and inclusive one. We welcome all countries delegations to attend the Belt and Road Forum for International Cooperation,” it said.

The ministry did not elaborate. It said on Tuesday North Korea would send a delegation to the summit but gave no other details.

The United States is sending a delegation led by White House adviser Matt Pottinger.

Despite Chinese anger at North Korea’s repeated nuclear and missile tests, China remains the isolated state’s most important economic and diplomatic backer, even as Beijing has signed up for tough U.N. sanctions against Pyongyang.

China has over the years tried to coax North Korea into cautious, export-oriented economic reforms, rather than sabre rattling and nuclear tests, but to little avail.

China has not announced who North Korea’s chief delegate will be, but South Korea’s Yonhap news agency said Kim Yong Jae, North Korea’s minister of external economic relations, would lead the delegation.

‘MISGIVINGS’

Leaders from 29 countries will attend the forum in Beijing on Sunday and Monday, an event orchestrated to promote Xi’s vision of expanding links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment.

Delegates will hold a series of sessions on Sunday to discuss the plan in more detail, including trade and finance. China has given few details about attendees.

Some Western diplomats have expressed unease about both the summit and the plan as a whole, seeing it as an attempt to promote Chinese influence globally.

China has rejected criticism of the plan and the summit, saying the scheme is open to all, is a win-win and aimed only at promoting prosperity.

Zhang Junkuo, deputy director general of cabinet think-tank the State Council Development Research Centre told reporters there were “misgivings, misinterpretations and misunderstandings” about the initiative.

“We must increase communication and exchanges so as to broaden our areas of cooperation and consolidate the basis for cooperation,” Zhang said.

In an English-language commentary on Saturday, China’s state-run Xinhua news agency said the new Silk Road, officially called the Belt and Road initiative, would be a boon for developing countries that had been largely neglected by the West.

“As some Western countries move backwards by erecting ‘walls’, China is contriving to build bridges, both literal and metaphorical. These bridges are China’s important offering to the world, and a key route to improving global governance,” it said.

Some of China’s most reliable allies and partners will attend the forum, including Russian President Vladimir Putin, Pakistani Prime Minister Nawaz Sharif, Cambodian Prime Minister Hun Sen and Kazakh President Nursultan Nazarbayev.

There are also several European leaders coming, including the prime ministers of Spain, Italy, Greece and Hungary.

Xi offered Prime Minister Alexis Tsipras of deeply indebted Greece strong support on Saturday, saying the two countries should expand cooperation in infrastructure, energy and telecommunications.

(Additional reporting by Elias Glenn; Editing by Eric Meijer, Robert Birsel)

U.S. retail sales rise broadly; consumer prices rebound

FILE PHOTO - A employee walks by a meat cooler in the grocery section of a Sam's Club during a media tour in Bentonville, Arkansas, U.S. on June 5, 2014. REUTERS/Rick Wilking/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales increased broadly in April while consumer prices rebounded, pointing to a pickup in economic growth and a gradual rise in inflation that could keep the Federal Reserve on track to raise interest rates next month.

The reports on Friday added to labor market data in suggesting the near stall in economic activity in the first quarter was an anomaly. But a moderation in year-on-year inflation led financial markets to dial down expectations of at least two more rate increases this year.

“The economy picked it up a notch from the slow start earlier this year, but the inflation fires are not burning brightly and this will likely keep the Fed on just a gradual pace for interest rate hikes later this year,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The Commerce Department said retail sales rose 0.4 percent last month after an upwardly revised 0.1 percent gain in March. Sales rose 4.5 percent in April on a year-on-year basis.

Economists had forecast overall retail sales increasing 0.6 percent last month. Excluding automobiles, gasoline, building materials and food services, retail sales gained 0.2 percent after advancing 0.7 percent in March.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

The economy grew at a 0.7 percent annualized rate in the first quarter, held back by the weakest increase in consumer spending in more than seven years. The Atlanta Fed estimates GDP will rise at a 3.6 percent pace in the second quarter.

In a separate report on Friday, the Labor Department said its Consumer Price Index rose 0.2 percent after dropping 0.3 percent in March. The rise in prices suggested that March’s decline, which was the first in 13 months, was an aberration.

In the 12 months through April, the CPI increased 2.2 percent. While that was a slowdown from March’s 2.4 percent increase, it still exceeded the 1.7 percent average annual increase over the past 10 years.

Financial markets are pricing in more than a 70 percent chance of a rate hike at the Fed’s June 13-14 policy meeting, according to CME Group’s FedWatch program. But the likelihood the U.S. central bank will raise rates twice before the end of the year fell after Friday’s data.

The Fed lifted its benchmark overnight interest rate by 25 basis points in March and has forecast two more hikes this year.

Prices of U.S. Treasuries rose and the U.S. dollar <.DXY> weakened against a basket of currencies after the release of Friday’s data. U.S. stocks were trading mostly lower, pulled down by weak financial and industrial sectors.

‘COMPETITIVE PRESSURES’

Gasoline prices jumped 1.2 percent in April after falling 6.2 percent in March. Food prices rose 0.2 percent as prices for fresh vegetables recorded their biggest increase since February 2011.

The so-called core CPI, which strips out food and energy costs, edged up 0.1 percent last month, reversing March’s 0.1 percent dip. The monthly core CPI was restrained by declines in the prices of wireless phone services, medical care, motor vehicles and apparel.

Rental costs increased 0.3 percent after a similar gain in March. The core CPI increased 1.9 percent on a year-on-year basis, the smallest gain since October 2015, after rising 2.0 percent in March. Still, April’s increase was above the 1.8 percent average annual increase over the past decade.

“To some extent, this new weakness in price inflation is due to competitive pressures rather than weak demand, so the Fed can afford to discount it,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

Consumer spending is being supported by a tightening labor market, marked by an unemployment rate at a 10-year low of 4.4 percent. A third report on Friday showed consumer sentiment rose in early May as the outlook for wages improved.

Motor vehicle sales increased 0.7 percent in April after three straight months of decreases.

There were hefty gains in sales at building material and electronics and appliance stores.

But sales at clothing stores fell 0.5 percent. Department store retailers have been hurt by declining traffic in shopping malls and increased competition from online retailers, led by Amazon.com <AMZN.O>.

Retailer J.C. Penney Co Inc <JCP.N> said on Friday its net loss widened to $180 million, or 58 cents per share, in the first quarter. On Thursday, Macy’s Inc <M.N> reported a 4.6 percent drop in first-quarter sales.

Sales at online retailers jumped 1.4 percent in April.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

World stocks retreat from record highs as valuations give cause for a pause

FILE PHOTO: Visitors looks at an electronic board showing the Japan's Nikkei average at the Tokyo Stock Exchange (TSE) in Tokyo, Japan, February 9, 2016. REUTERS/Issei Kato/Files

By Vikram Subhedar

LONDON (Reuters) – Global stocks paused near record highs as worries over China’s banking system provided an excuse for investors to lock in some profits. The dollar was set for its best week of the year on bets the Federal Reserve will raise U.S. interest rates in June.

A dip on Wall Street overnight on signs of weak consumer spending and waning enthusiasm over the recovery in European corporate earnings has put MSCI’s gauge of world stock markets <.MIWD00000PUS> on track for its first weekly loss in four.

The index trades at now trades at more than 16 times forward earnings, according to Thomson Reuters data, and above its long-term average of 15.6 times.

U.S. stock futures <ESc1> were down another 0.2 percent on Friday.

“We’ve had a nervous twitch about China, over this week,” said Sean Darby, chief global equity strategist at Jefferies. “We’ve had a bit more of a regulatory overhang coming through in the financial system.”

China’s banking regulator this week launched emergency risk assessments of lenders’ new business practices, sources told Reuters, as Beijing extends its crackdown on shadow banking.

With corporate earnings seasons in the U.S. and Europe drawing to a close investors, focus is likely to shift back to central banks, particularly in the United States, where inflation pressures are growing.

U.S. data on Thursday showed producer prices rebounded more than expected last month, leading to the biggest annual gain in five years.

Combined with a tightening labor market, firming inflation backs market expectations that the Federal Reserve will raise interest rates at its meeting next month. The central bank has forecast two more increases this year after raising rates a quarter of a point in March.

The stronger fundamentals in the U.S. helped offset uneasiness over political turmoil after President Donald Trump abruptly fired FBI chief James Comey.

The dollar index, which tracks the currency against a basket of six major rivals, was flat on the day at 99.622 <.DXY>, but was up 1 percent for the week.

Sterling was steady on the day at $1.2886 <GBP=> after dropping to a one-week low on Thursday following the Bank of England’s decision to keep interest rates unchanged. Policymakers indicated that rates were unlikely to rise until late 2019.

EUROPE’S SWEET SPOT

In Europe, stock markets steadied this week. Company profits are expected to grow 20 percent in the first quarter, the best corporate results in a decade, according to Morgan Stanley.

Their outperformance this year against global peers remains intact, with the benchmark’s <.STOXX> 10 percent gains outpacing the 7 percent rise on the S&P 500 <.SPX>.

Greek stocks <.ATG> snapped a their longest winning streak in two decades.

“European stocks are still in the sweet spot of basking in the removal of political risk in Europe for the time being, though it is somewhat ironic that we could see a modest decline on the week as investors take stock,” said Michael Hewson, chief markets analyst at CMC Markets.

European equity funds pulled in a record $6.1 billion in inflows in the week to May 10, according to data from EPFR, with centrist Emmanuel Macron’s win in the French presidential election seen as a trigger.

Concerns over valuations are beginning to emerge. Credit Suisse strategists cut their rating on Spain, the euro zone’s top performing market for the year, to “underperform,” saying the strong earnings and economic momentum was moderating.

At the same time, the collapse in volatility across asset classes to multi-year or record lows, is tempting more investors into making bets that markets will remain calm given the brighter outlook for global growth.

Bank of America Merrill Lynch said its high-net-worth clients cut cash and resumed buying low-volatility exchange-traded funds.

Yields for the euro zone’s weaker borrowers, such as Italy, Portugal and Spain, were all also 1 to 3 basis points lower as investors awaited announcements of the volumes for expected bond sales next week by France and Spain.

Oil prices held recent gains as traders expected OPEC-led production cuts to extend beyond the middle of this year and as U.S. crude inventories fell to their lowest levels since February.

International Brent crude futures <LCOc1> were at $50.78 per barrel. U.S. West Texas Intermediate crude futures <CLc1> were at $47.85 per barrel, both little changed on the day.

(Reporting by Vikram Subhedar, editing by Larry King)

California Controller warns that economic downturn may be near

FILE PHOTO - The California flag flies above City Hall in Santa Monica, California, U.S. on February 6, 2009. REUTERS/Lucy Nicholson/File Photo

By Robin Respaut

SAN FRANCISCO (Reuters) – California’s state tax collections in April fell short of expectations, a sign that the state may be headed toward an economic downturn, State Controller Betty Yee warned on Wednesday.

Collections totaled $15.98 billion, $1.05 billion or 6.2 percent short of the governor’s projected budget for the month.

“April is usually the state’s biggest tax filing month, so lower-than-expected personal income tax receipts are troubling,” said Yee, the state’s chief fiscal officer, in a statement.

“While we await the governor’s May Revision, this is another signal that we may be inching towards an economic downturn, and we must tailor our spending accordingly.”

California has collected $96.88 billion during the first 10 months of fiscal 2017, which ends June 30. That means the state is $1.83 billion behind last summer’s budget estimates and $211.3 million shy of January’s revised fiscal year-to-date predictions.

Governor Jerry Brown plans to release on Thursday his mid-year revision of the proposed state budget for fiscal 2018. The revised budget is expected to reflect changes in the state’s financial position since January.

For the month of April, during which California tends to collect about 17 percent of its personal income tax receipts, collections lagged by 5.3 percent. Retail sales and use tax receipts fell short of projections in the governor’s proposed 2017-18 budget by $106.7 million, or 13.3 percent. Corporation tax receipts for April were 13.8 percent lower than estimates in the budget.

In January, Governor Brown proposed a $179.5 billion state budget for fiscal 2018, a 5 percent increase over this year, but he warned that the state must remain fiscally prudent ahead of an inevitable economic downturn.

California is especially vulnerable to downturns, because the state is more reliant than most on capital gains taxes, a volatile revenue source, and less on property tax revenue, which is more stable.

(Reporting by Robin Respaut; Editing by Richard Chang)

Mexico presses Trump to uphold NAFTA for good of both nations

U.S. President Donald Trump arrives aboard Air Force One at JFK International Airport in New York, U.S. May 4, 2017. REUTERS/Jonathan Ernst

MEXICO CITY (Reuters) – Mexico made a pitch to U.S. President Donald Trump on Wednesday to uphold the NAFTA trade deal, arguing that unwinding economic integration would hurt both nations, damaging U.S. exports, risking American jobs and hitting consumers north of the border.

Responding to a March 31 executive order by Trump for a review of the U.S. trade deficit, Mexico said its trade surplus with the United States was misunderstood and that the real hit to U.S. manufacturing jobs came with China’s accession to the World Trade Organization (WTO) in 2001.

Last year’s U.S. deficit with Mexico of $63.2 billion also reflected a weak peso after it was battered by uncertainty over the future of bilateral trade relations, according to a document published by the Mexican Embassy in Washington.

“The increasing integration of our economies makes Mexico critically important to the U.S. economy, not only as an export market, but also as a partner in production,” the director of the embassy’s trade and NAFTA office, Kenneth Smith, wrote.

Mexico was responding to the U.S. Commerce Department’s request for public input as it prepares a report for Trump on the United States’ $500 billion annual trade deficit. The report and public comments will be sent to Trump in June.

Mexico said that, without NAFTA, the average tariff on Mexican exports to the United States would be 3.5 percent, or about half the average tariff on U.S. exports to Mexico, because of the “most favored nation” clause that would apply under WTO rules.

U.S.-Mexican trade relations have been strained by Trump’s repeated vow to scrap the North American Free Trade Agreement if he cannot secure better terms for U.S. workers and industry.

Trump has cited the U.S. trade deficit with Mexico as proof that the United States was the loser in the relationship, saying the Americans would be better off if the two nations did not trade at all.

However, Mexico said 75 percent of its exports to the United States are inputs in U.S. production processes and that the United States has an $8 billion surplus in services.

“Workers on both sides of the border work together in the production of goods to successfully compete in global markets,” Smith said.

The U.S. energy industry also relies on exports to Mexico, which is now the biggest export market for U.S. refined oil products and natural gas, Smith said.

(Reporting By Frank Jack Daniel, Writing by Dave Graham and Mitra Taj)

U.S. jobless claims fall; continuing claims lowest since 1988

FILE PHOTO: A "Now Hiring" sign hangs on the door to the Urban Outfitters store at Quincy Market in Boston, Massachusetts September 5, 2014. REUTERS/Brian Snyder

WASHINGTON – New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls hit a 28-1/2-year low, pointing to a rapidly tightening labor market that could encourage the Federal Reserve to raise interest rates in June.

Initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 236,000 for the week ended May 6, the Labor Department said on Thursday. Claims for the prior week were unrevised.

Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 245,000.

Claims have now been below 300,000, a threshold associated with a healthy labor market, for 114 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is close to full employment, with the

unemployment rate at a near 10-year low of 4.4 percent.

Labor market strength, also marked by a sharp rebound in job growth in April, has left financial markets anticipating further monetary policy tightening from the Fed in June.

The U.S. central bank increased its benchmark overnight interest rate by 25 basis points in March and has forecast two more rate hikes this year. The economy created 211,000 job in April after adding only 79,000 positions in March.

A Labor Department official said there were no special factors influencing last week’s data and only claims for Louisiana had been estimated.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 500 to 243,500 last week.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid tumbled 61,000 to 1.92 million in the week ended April 29, the lowest level since November 1988.

The four-week moving average of the so-called continuing claims fell 27,500 to 1.97 million, the lowest level since February 1974.

((Reporting By Lucia Mutikani; Editing by Andrea Ricci))

Brazil readies $18.5 billion public spending plan: newspaper

FILE PHOTO: General view of a construction site of the railroad Transnordestina in the city of Salgueiro, Pernambuco state, northeast of Brazil, October 26, 2016. REUTERS/Ueslei Marcelino

SAO PAULO (Reuters) – Brazil plans to invest 59 billion reais ($18.50 billion) in public funds by the end of 2018 to accelerate the economic recovery and bolster aging infrastructure, newspaper Valor Econômico said on Wednesday.

More than a third of that, or 22.7 billion reais, would fund transportation projects, such as highways, railroads and airports, the report added, citing documents presented to ministers on Tuesday. The remaining funds would be distributed among three areas: housing, sewage and urban transit; defense; and health, education, water projects, tourism and sports.

President Michel Temer’s administration will propose the “Avançar,” or “Advance,” program to replace an ongoing plan known as PAC, Valor reported.

Representatives for the finance and planning ministries were not immediately available to comment.

Temer’s predecessor, Dilma Rousseff, introduced the PAC, or growth acceleration program, as her flagship policy in 2007 when she was chief of staff under leftist President Luiz Inácio Lula da Silva.

Economists have said the program had little effect on growth and weighed on public finances as Brazil’s economy, Latin America’s largest, slipped into its deepest recession in decades. Rousseff and center-right Temer have slashed PAC’s budget repeatedly in recent years to try to curb ballooning public debt and regain investors’ trust.

Increased public spending could make it harder for the government to plug a growing budget gap. It could also force additional austerity elsewhere at a time when the economy shows timid signs of recovery.

Temer has pursued a plan to streamline the country’s pension system to cut social security spending for years to come, triggering strong opposition. His infrastructure efforts have so far focused on privatization, with a successful airport auction in March demonstrating investors’ interest in Brazilian assets.

(Writing by Bruno Federowski; Editing by Lisa Von Ahn)

Dollar slips, yen gains, after Trump fires FBI chief

Dollar banknotes are seen in this picture illustration taken April 28, 2017. REUTERS/Dado Ruvic/Illustration

By Jemima Kelly

LONDON (Reuters) – The dollar fell and the perceived safe-haven yen gained on Wednesday, after U.S. President Donald Trump abruptly fired FBI Director James Comey in a move that shocked Washington and dampened some of this week’s strong risk appetite.

Rekindled fears that North Korea could be gearing up for another weapons test also underpinned the yen, which had sunk to an eight-week low the previous day as investors’ appetite for riskier currencies increased on the back of a weekend French election result that eased euro break-up fears.

The dollar, which had strengthened to as much as 114.325 yen on Tuesday <JPY=>, slipped back to 113.87 yen.

Trump said he had sacked FBI Director James Comey – who had been leading an investigation into the Trump 2016 presidential campaign’s possible collusion with Russia to influence the election outcome – over his handling of an email scandal involving presidential nominee Hillary Clinton.

But the move ignited a political firestorm, raising suspicions among Democrats and others that the White House was trying to blunt the FBI probe involving Russia.

The dollar slipped 0.2 percent against a broad index <.DXY>.

“There’s not much risk sentiment – that’s to some extent the main driver today, mainly with respect to geopolitical questions,” said Credit Agricole currency strategist Valentin Marinov in London.

Comments from European Central Bank President Mario Draghi failed to have any clear impact on the euro, which was flat at $1.0878 <EUR=>. Draghi said it was too early for the ECB to declare victory in its quest to boost euro zone inflation.

“Draghi is repeating the same message that he made at the last ECB press conference – there are no big surprises. He’s defending the ECB’s dovish policy stance,” said Marinov.

The euro had risen to a six-month high above $1.10 on Monday, after Emmanuel Macron defeated the anti-EU Marine Le Pen in France’s presidential run-off, as worries over European political risk faded and focus returned to central bank policy.

The Swiss franc, another safe-haven currency, fell to its lowest in seven months on Tuesday and stayed close to that at 1.09575 francs per euro, flat on the day <EURCHF=>.

Commerzbank currency strategist Esther Reichelt, in Frankfurt, though, said risk appetite could only drive the currency market so far before new drivers were needed.

“Dollar strength could materialize more, given the more benevolent risk environment, but that can only move the market for so long – you always need new impetus,” she said.

U.S. political uncertainty has tended to weigh on the dollar in recent months, on the view that a divided Congress could derail Trump’s promised tax reform and stimulus programme.

(Reporting by Jemima Kelly, editing by Larry King)

Germany eyes new North Korea sanctions: government sources

The City Hostel Berlin beside the compound of the North Korean embassy is pictured in Berlin, Germany, May 9, 2017. REUTERS/Fabrizio Bensch

BERLIN (Reuters) – Germany will tighten economic sanctions against North Korea over its nuclear program in line with a U.N. resolution passed in November and subsequent EU regulations, German government officials said on Tuesday.

Berlin plans to ban Pyongyang from leasing properties that belong to its embassy in the heart of the German capital, foreign ministry sources said, confirming news first reported by Sueddeutsche Zeitung newspaper and broadcasters NDR and WDR.

“We must increase pressure to bring North Korea back to the negotiating table. That means we must consistently implement sanctions imposed by the United Nations and the European Union,” said foreign ministry state secretary Markus Ederer.

“In that regard, it is particularly important that we do even more to dry up the financial resources used to fund the nuclear program,” he said in a statement. “The German government is in complete agreement and the responsible authorities will now take the necessary steps.”

Before Germany’s reunification in 1990, North Korea had diplomatic relations with Communist East Germany and owned an embassy and several buildings in East Berlin.

The embassy has continued to operate while one building has since be turned into a low-cost hotel and another into a conference center, according to German media reports.

The embassy collects “high five-digit” sums in rent for the properties leased to two operators since 2004, they say.

The United Nations explicitly banned such leasing arrangements by North Korean embassies worldwide as part of U.N. Security Council Resolution 2321, passed in November 2016 after Pyongyang’s fifth nuclear test.

The resolution says: “All member countries shall prohibit North Korea to use real estate that it owns or leases for other than diplomatic or consular activities.”

Tensions between North Korea and the global community have increased over the past year amid repeated missile tests by Pyongyang.

U.S. President Donald Trump warned in an interview with Reuters this month that a “major, major conflict” was possible with North Korea, but then raised eyebrows by saying he would be “honored” to meet North Korean leader Kim Jong Un under the right circumstances.

(Reporting by Andrea Shalal and Andreas Rinke; Editing by Madeline Chambers and Tom Heneghan)