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Opinion & Analysis

Exchange-traded notes to attract Wall Street Investors, claims CBOE Analysts

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As per recent news, Ed Tilly who is the CEO, president and chairman of Chicago Board Options Exchange (CBOE), said that to attract Wall Street Investors, it is important that exchange-traded notes (ETNs) from Bitcoin (BTC) is made public. The visibility is important for the Wall Street institutional investors as far as joining the digital asset industry is concerned.

CBOE is the largest options exchange in the United States and offers options for over 2,200 companies, 22 stock indices, and 140 exchange-traded funds. It is a subsidiary of the Chicago Board of Trade and was established in 1973. CBOE Global owns CBOE. CBOE is the issuer of the CBOE Volatility Index and is a popular measure of the stock market’s expectations of volatility.

In a press meet, Billy said that there had not been a substantial growth for Bitcoin futures in recent times due to the absence of possible notes or trackers which are usually associated with BTC, with which retail customers could trade.

He even claimed that as far as the offering of access points to Wall Street Investors are concerned both exchange-traded notes and futures are important. Exchange-traded notes or ETNs are predominantly more accessible to the general investors when compared to traditional futures because of the fact of their low barrier for entry. Having a future comes along with having an ETN as well which is attractive to retail customers followed by institutional customers who can avoid the risk on the listed future market.

An exchange-traded note is a senior, unsecured, unsubordinated debt security issued by an underwriting bank. Similar to other debt securities, ETNs have a maturity date and are backed only by the credit of the issuer. ETNs are designed to provide investors access to the returns of various market benchmarks.

According to Billy, there is a particular reason for not approving the Bitcoin exchange-traded products such as the still-pending exchange-traded fund (ETF) application as the regulators are not competent to protect investors from trade manipulation which are inevitable in a market where regulators lack control.

An Exchange-Traded Fund or ETF is a fund that is traded on a stock market. They function as investment funds which allow everyone accesses to an index or commodity providing the same profit to investors as the major markets do. Thus, ETF stocks are one of the most popular among exchange users because of the easiness to invest in industries without being charged by the fund manager. Before buying an ETF, it is necessary to check what is included in the fund.

As per a leading news agency, Cointelegraph, Brian Kelly who is an entrepreneur and contributor to the news channel CNBC, stated in a press meet that there might not be any chance for a Bitcoin ETF approval this year.

It was in the news recently that Bitwise Asset Management which is a digital asset index fund provider is looking forward to registering with the US Securities and Exchange Commission to introduce a new Bitcoin exchange-traded fund platform.

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Trading News

Crypto Market Bounced Back Marginally By $5 Billion As Bitcoin Price Surpasses $3,700

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Since last 2 days, the crypto exchange has bounced back marginally by $5 billion, from $120 billion to $125 billion after a promising breakout of the Bitcoin cost above $3,700.

The unexpected solid development of Bitcoin could prompt the transient recovery of other major crypto resources and low market capital cryptocurrencies by the next few days.

Bitcoin’s Promising Gains by Monday

Generally, amid the weekend, the crypto exchange plans to show a plunge in volume and a minor decrease in exchanging activities.

Despite, since last two days, the volume of Bitcoin has stayed over the $5 billion mark with the day by day volume of the crypto exchange above $17 billion.

The moderately high everyday volume of major crypto resources has enabled the market to bounce back before Monday when the volume typically starts to pick up, and the market begins to see an expansion in exchange activities.

Preceding the breakout of Bitcoin above $3,700, an ultimate digital currency technical expert with an online alias ‘Cred’ said that if the Bitcoin cost outperforms $3,700 temporarily, it is almost certain to prompt a positive upward development.

The expert clarified:

Extremely compacted value activity following the high set on Monday. My agenda is direct: Price underneath and discovering resistance at $3,560s I’ll search for moves focusing on $3,430s. Breakout and cost acknowledged above $3,700s I’ll be a buyer until $3,840s.

All in all, while a breakout of obstruction levels beneath the $4,000 stamp may keep a further dip under the mid-$3,000 region, it might be lacking in giving an establishment to the predominant cryptocurrency to start a legitimate short-term rally.

Since the end of December 2018, Bitcoin value has stayed in a tight range between $3,500 to $4,100, unfit to neither test key opposition levels nor dip under vital help levels.

Not absolutely unfavorable for Bitcoin

In all cases, many major crypto resources and low market capital digital resources have reported 2 to 4% gains against the U.S. dollar on the day.

Ethereum, Litecoin, and Cardano flooded by 3, 4 and 5% separately over the last 12 hours, following the upward value movement of Bitcoin.

While the bear showcase in crypto stays in full impact, driving organizations in likes of Binance see an appeal in key markets like Europe.

Recently, following the release of Binance Jersey, a directed fiat-to-crypto trade that supports British pound and euro exchanges, Binance CEO Changpeng Zhao stated:

Binance.je is overwhelmed with enrollments. There is an overabundance of KYC checks as of now. More assets are distributed to lessen it. Meanwhile, we value your comprehension and tolerance. The enrollment prize is FIFO based no stresses. Simply crazy! One thing we can do is thinking little of ourselves and the market.

To keep a further dip under a low enough range, a supportable high daily volume in the crypto showcase is pivotal. For the time being, the market is seeing a moderately abnormal state of exchanging movement crosswise over major markets.

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Company News

A Joint Cryptocurrency in Horizon to Strengthen The Saudi-Emirati Economic Alliance

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The Emirates News Agency based in The United Arab Emirates (UAE) has reported that the Arab nation will join hands with their neighbor Saudi Arabia to launch a new cryptocurrency, in a meeting held by “The Executive Committee of the Saudi-Emirati Coordination Council” in Abu Dhabi. The report mentions that the conference in the UAE capital had a total of 16 members from the executive committee from both countries, so as to ascertain the joint initiatives outlined in the Strategy of Resolve. The committee was presided by Mohammad bin Abdullah Al Gergawi, Minister of Cabinet Affairs and The Future, from the UAE side, and Mohammed bin Mazyad Altwaijri, Minister of Economy and Planning, from the Saudi side.

The Strategy of Resolve includes seven strategic initiatives that follow up the bilateral cooperation in the field of civil aviation, financial awareness for Children, customs and security, entrepreneurship and development of joint cryptocurrency among the others. Saudi-Emirati Pilot cryptocurrency will be the first of its kind joint cryptocurrency in the world.

“[The project] will be strictly targeted for banks at an experimental phase with the aim of better understanding the implications of blockchain technology and facilitating cross-border payments” quoted the article.

The primary aim of such a joint venture according to the news report is “to safeguard customer interests, set technology standards and assess cybersecurity risks.” The project will also be a study on the impact of a central currency on economic policies.

The news of the cryptocurrency had been first delivered in December 2018, when Gulf News had reported that the central bank of UAE would join hands with Saudi Arabian Monetary Authority (SAMA for short) to work on developing a digital currency using blockchain technology.

“This is probably the first time ever that witnesses the cooperation of monetary authorities from different countries on this topic and we hope that this achievement will foster similar collaboration in our region” Mubarak Rashed Al Mansouri, the governor of the UAE’s central bank had said then.

The economic alliance between Saudi Arabia and the UAE is one of the strongest in the world. The combined sovereign wealth funds of the Kingdom and the UAE are ranked second in the world. As per the data from the World Bank, both the countries rank eighth concerning exports of goods and services. The two countries have an oil reserve which accounts for nearly 25% of the total of the global stockpile.

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News

Chileans to pay tax on income from cryptocurrency from April

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Cryptocurrency investors will have to pay taxes on earnings from April this year. According to the Internal Revenue Services authority of the country or Servicio de Impuestos Internos (SII), crypto assets will also have to be filed with annual tax returns. This is a strong step taken by the South American country to regulate the digital assets market, following in line with agencies all over the world.

In 2018, Value Added Tax could not be imposed on cryptocurrencies as they were considered to be intangible. Since then the SII has been working to build a taxable framework for digital assets. Earnings from crypto trade will be categorized under ‘other own income and third-party income from companies that declare their effective income.’ However, even though it is being brought under taxation, the legal status of cryptocurrencies remains a topic of discussion in the country.

In an official statement letter by Fernando Barraza, director of the SII, read that individuals or firms engaged in crypto trade need to register their operations through tax-exempt invoices. This way the authority will be track all the transactions carried by the investors and regulate policies accordingly. This move to bring cryptocurrency under the taxation radar will bring much-needed revenue for the administration and help it study the functioning of digital currencies. The country still doesn’t have any specific guidelines for this type of assets, due to which the administration has been quite defensive against them.

On the flip side, imposing taxes on cryptocurrencies is a positive sign for investors. Also, investors can get Tax advantages from this crypto tax. Recently, the cryptocurrency suffered a severe blow in the form of account blockades. Some banks in Chile stopped serving accounts that were engaged in the trade of crypto assets. The Third Chamber of the Chilean Supreme Court also rejected an appeal to direct the banks to re-open closed accounts. Therefore, in such an unfavorable climate, the directive on taxation has come as a blessing in disguise and given hope to investors.

Chile isn’t the only country that hasn’t accepted digital currencies yet. Many developing nations like India, Malaysia, Indonesia, Pakistan, etc. have been skeptical about digital assets. The Reserve Bank of India also directed the commercial banks to forbid catering to crypto related transactions. However, the recent trends show that agencies across the globe are moving from the mindset of banning cryptocurrencies to regulate them heavily.

Chile, like many other developing countries, has seen a boom in cryptocurrency trade in the past couple of years. Chileans are one step ahead when compared to other countries’ people, as they have even started to purchase and sell products and services using cryptocurrency as the medium instead of traditional currency. South American countries have recently started to adopt and accept cryptocurrencies, which has enabled the digital asset markets to grow and prosper, albeit steadily. The popular crypto exchange of Chile, Crypto MKT recently partnered with online payments platform Flow. Cl, which will now allow about 5,000 local merchants to accept cryptocurrencies as a mode of payment.

China Tax Cut Strategy to Tackle Slowdown
Financial Planning

China’s Tax-Cut Strategy to Tackle Slowdown

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As per the recent Chinese credit data, the Chinese Government is relying on the tax cut as the first line of defense against the slowing down of the economy. The data imply that the Chinese Government has accepted the fact and started taking measures for the same.

Senior Chinese policy officials confirmed that more large scale tax reductions are in the pipeline. As the country is facing multiple issues with the economy like worsening of trade and total output, it has finally depended on the fiscal measures. As per JPMorgan Chase & Co., the total impact would be around 2 trillion yuan ($300 billion), or 1.2 percent of the gross domestic product of China.

This time China is following a different path to tackle the situation than the path taken after the global financial crisis. Its focus on the previous attempt was on infrastructure investment and monetary policy changes. This time China wants to tackle the slower economic growth without a debt blowout. It has managed to expand the credit growth for December, and the Central bank has been very successful in curbing the shadow banking which possesses a huge risk to the economy.

As per data, aggregate Financing in November was 1524 billion yuan, and in December it rose to 1590 billion yuan, with a median estimate of 1300 billion yuan. Out of the total financing, new yuan loans for November was 1250 billion yuan, and in December it contracted to 1080 billion yuan, with a median estimate of 825 billion yuan. And M2 money supply year-on-year basis for November was 8.0 percent, and in December it rose to 8.1 percent, with a median estimate of 8.1 percent.

Cui Li, the head of macro research at CCB International Holdings Ltd. in Hong Kong said at this moment the scope for monetary policy is very less, and fiscal policies such as tax cuts will be effective. She also added that the high leverage and property prices had limited the chances of massive monetary stimulus. But comparing with the infrastructure binges, as a growth measure, tax cut’s effects will be realized gradually.

Last year May saw a deduction of value added tax by the Government in manufacturing, transportation, construction, telecommunications, and farm produce industries, followed by a lowered personal income taxes and the introduction of more such deductions. And earlier this month, the State Council announced a $29 billion annual tax cut meant for small businesses.

Though it is still unclear whether the new approach of a tax cut will be effective or not owing to global tensions and trade war with the United States, but the approach has been adopted due to China’s debt load. By spending money on infrastructure like bridges, road, railways, etc. may become counterproductive for the stability of the economy.

JP Morgan economists led by Zhu Haibin wrote in a report that the Government is facing the debt load problem due to years of over-investment and huge spending on infrastructure that led to a surging debt.

The report also states it is yet uncertain that how much tax benefits will be moved to the required class for showing the effects on the Economy.

As per economists, the reduction in the tax may boost the Gross Domestic Product growth by a minimum of 0.46 percent. But, the slowdown linked to slower growth of world economy and trade war will not leave the Chinese economy very soon. It will linger on to the few next quarters.

The new policy changes that are scheduled to happen was briefed by Zhu Hexin, deputy governor of the People’s Bank of China, Xu Hongcai, assistant minister of the Ministry of Finance, and Lian Weiliang, the vice chairman of the National Development and Reform Commission. They also pledged to support the consumption of cars as well as other household goods. It should be reported here that the sales of cars fell for the first time in 28 years.

Xu said that the government would facilitate local governments to issue more infrastructure bonds in comparison with 2018 that will ensure continuous infrastructure development, but the rise in bonds should not be taken as a measure to tackle slower growth.

A Shanghai-based economist at Shenwan Hongyuan Group Co. said that in order to increase the personal consumption and consumption by businesses, a tax cut is the only way out for the Government. Introducing big financial stimulus packages may not yield results that are expected.

However, owing to the nation’s quasi-fiscal efforts such as special bonds and land sales will lead to an inflated fiscal deficit. It is expected to have a growth in Fiscal deficit of 11.3 percent of total output this year, whereas the last year’s mark was at 10.7 percent.

Tariff Cuts-

The government also has declared rounds of import tariff deductions so that the cost pressure would be minimal on the consumers and it also had said that opening up of the economy would be again rolled out this year on a wider basis.

The Government is most likely to set a target growth for this year in the range of 6 and 6.5 percent, as per experts.

Carie Li, an economist at OCBC Wing Hang Bank Ltd in Hong Kong, said the credit data is still showing negative numbers as the Government’s prolonged campaign to wring out the shadow banking has been successful. The new stimulus measures in terms of fiscal policy changes are still unable to fill the gap created by the crackdown by the Chinese Government. And the Government, as well as the Central bank, may need to think about the funding needs of the privately-owned businesses specifically in order to achieve the credit growth they have expected.

Advisors

Chinese Central Bank Infuses Record Amount into Banking System

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China has become the biggest victim of the global slowdown. Proving this point stronger, the Chinese central bank, People’s Bank of China has infused 560 billion Yuan ($83 billion) into the banking sector. It is the highest amount to be injected in a day in Chinese history.

The yield on the 10-year Chinese government bond fell below 3.1 percent, and it is the lowest yield in the last two years, as per the statistics by financial database Wind. It should be reported here that bond yields fall when the price of the bond rises. And that implies people prefer other investments more than bonds. Ultimately it shows anticipation of an economic slowdown.

The People’s Bank of China said in a statement the cash availability with the banks is declining quickly and being at the peak of the tax period, the infusion of liquidity was much needed.

Liquidity is the availability of hard cash or the ease at which assets can be turned into cash. It has much importance for the companies and business houses as liquidity ensures money to pay taxes and operate the business on a daily basis. Since the last year, Chinese businesses have been facing difficulties with sluggish economic growth, increased financing difficulties and greater obligations to provide benefits for employees. And, the Chinese New Year Holiday is just three weeks away when the whole nation will be shut down for a week, giving no productivity of the businesses.

Zhao Bowen, research director at Beijing-based Blue Stone Asset Management, said that the enterprises in China were expected to pay more than 1 trillion yuan in taxes in this week. Hence, it is the peak period of tax payment. A historically low level of fiscal deposits and the expiration of 390 billion yuan in medium-term lending are also adding to the woes of the already devastated economy.

Zhao added that at the very moment the Government should push back against the downward pressure on the Chinese economy, and take the first step in the first quarter itself. He also said that the central bank is trying to loosen overall credit conditions and coordinate with the banks to issue large local debts.

The record infusion of 560 billion Yuan into the banking system was done through the reverse repurchase agreement (Reverse Repo). It means buying short-term bonds from some commercial lenders so banks will have more liquidity at the disposal. Sales of the bonds are called repurchase agreement (Repo). Both these measure of Repo and Reverse Repo are part of the central bank’s liquidity management tool, Open Market Operations (OMO).

As per the records of financial database Wind showed, the second highest injection of liquidity into the banking sector happened in 2016, when the Chinese economy was going through almost the same phase. Though no explanation followed that injection, today’s infusion of liquidity comes with an explanation that it was done to maintain reasonable and sufficient liquidity in the banking system.

Ting Lu, Nomura’s chief China economist, said it is evident that People’s Bank of China is stepping up for monetary easing, but the infusion in question is a seasonal move, and it should not be confused with long-term liquidity injections. It also implies that the central bank is cautious enough to stabilize interbank rates and bond yields to offset potential liquidity shocks.

Chinese Premier Li Keqiang also has declared that the Chinese Government would cut the reserve requirement ratio for the banks so that they hold more money to be used in the market. The year 2018 has seen four such cuts in the reserve ratio requirement.

Company News

Microsoft Signs Deal with Walgreens

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Amazon has recently become the most valuable company in the world with the highest market capitalization. In the times of Amazon’s growth, Microsoft has also started involving with more retailers. Recently, Microsoft has signed a multiyear deal with Walgreens Boots Alliance (WBA).

Though Amazon’s core business still lies in e-commerce, it has been expanding into many sectors along with that. It has opened brick and mortar shops through Amazon Go Stores, its Whole Foods acquisition and other efforts — and at times that’s proving to be an advantage to Amazon’s competitors in the cloud business. And recently, Amazon has reportedly been taking an interest in health care. Though not much is talked as of now, it has started its venture with acquiring online pharmacy PillPack and teaming up with J.P. Morgan and Berkshire Hathaway for financial advice for a long-term plan to improve care and reduce costs for employees.

WBA CEO and Executive Vice Chairman Stefano Pessina said he is not afraid of healthy competition from Amazon. He is hopeful that if Amazon enters into this sector, it will create an ecosystem for the sector and companies will thrive the way they deserve to. He also added that he had never believed that one company could monopolize one segment of the market. If one company is doing the right thing, it will have the ability to sustain the toughest of the competition.

As far as the deal goes, Walgreens Boots Alliance is signing up more than 380,000 employees for its Microsoft 365 cloud apps offering, including Office 365, Windows 10, and mobility and security tools. The company will transfer most of its Information Technology workloads to Microsoft’s Azure public cloud.

Walgreens Boots Alliance has almost 400 distribution centers that deliver to hundreds of thousands of doctors, hospitals, health centers, and pharmacies annually. It is also operating Walgreens and Duane Reade stores. The company has acknowledged Amazon’s acquire in the Pharma sector in the risk factor section of the latest annual report.

The deal with Microsoft will also include tests of “digital health corners” within some Walgreens stores, along with cooperation on research and development and software for managing patient engagement and chronic disease detection and record keeping.

Microsoft CEO Satya Nadella said that the deal was the outcome of a conversation three years ago. He also added that the WBA went through a pretty rigorous process of really finding the right partner who can bring both world-class technologies, but also the trust as well in order to be able to help them build the ecosystem that is needed.

He also added because, ultimately, this is about broad partnerships that need to be harnessed by Walgreens in order to deliver the services they are envisioning, and they needed to find a partner who, on the technology side, has the capability to do that ecosystem orchestration and is trusted. That is something where Microsoft does obviously deliver well in, and he was glad to really bring all of that to this partnership.

Nadella said that Microsoft would work as the glue for various technology and partnerships that will bring data from multiple sources together so that the new program can be established as soon as possible.

He emphasized that the deal is not just about Microsoft. The main motive here is to orchestrate that entire ecosystem of tech providers in order to help companies like WBA transform. It should be reported here that Microsoft has recently signed partnerships for cloud service rendering with big retailers like Gap, Kroger, and Walmart. But, the Amazon Web Services also possesses a large number of retail clients like Brooks Brothers and Under Armour, as well as health-care companies like Bristol-Myers Squibb and Celgene.

In the growing market capturing by Amazon in various segments, the other companies have to play cautiously finding the right allies at the right moment to tackle the big competition ahead.

UK Parliament Rejects PMs Brexit Deal by 230 Votes
News

UK Parliament Rejects PM’s Brexit Deal by 230 Votes

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UK Parliament has defeated Prime Minister’s Brexit deal on a crushing margin. As the date of the divorce is nearing, UK may have to leave the European Union without a deal or even have to stay in it.

Parliament had voted 432-202 against the deal proposed by the Prime minister. It is said to be the worst defeat for the Government in the recent British history. Not only the Brexiteers but also the lawmakers in support of EU membership voted down the deal.

The final date of March 29 for separation is nearing. And with these uncertainties, the United Kingdom is going through the deepest crisis of the century. The question remains intact about how to leave the union or even whether to leave the union. It should be reported here that the United Kingdom joined the European Union in 1973.

The British Prime Minister Theresa May wanted from the starting to depart with the European Union amicably having decided the future course of the relationship with the union. But, the recent defeat and the first British parliamentary defeat of a treaty since 1864, made it clear that the two years of strategy and persuasion did not work for the PM.

Anand Menon, professor of European politics and foreign affairs at King’s College London said the Brexit deal is basically dead. The EU lawmakers, as well as the British lawmakers, would consider the deal dead and as of now, Britain has neither Brexit nor any alternative to Brexit.

The British Prime minister has repeatedly refused to resign in the whole process of gathering consensus, but now she has some limited options at her hands. She might get agreed on the Brexit with no deal with the European Union or any last moment concessions from the European Union. She also has other options like a delay to Brexit, resignation, an election or a referendum.

The Dilemma-

Since 2016 referendum which allowed the Brexit to happen on a majority of 52 to 48 percent, the British political class has been debating how to leave the European projected which was created by Germany and France on the aftermath of World War II.

As the country is divided on the question of EU membership, the matter of vital importance is British’s contemporary position and the importance of its decision as it will shape the future generation’s prosperity.

Before the deal, Theresa May had made one thing clear that Britain would rather stay in the European Union than leaving the European Union without a deal. She had also urged her fellow conservative members not to let the Labour party hold power to control the Brexit. Labour leader Jeremy Corbyn, said he is now expecting an early election after calling a vote for a no-confidence motion. After the huge defeat, it is undemocratic for her to continue in the Government.

Supporters of EU membership strongly advocate that the Brexit will create more fissures between the western unity and it will undermine the reputation of the United Kingdom as a stable destination for investment, and it would eventually impact Britain’s importance in the Global Politics.

The opponents of Brexit also are hoping for another referendum and this time they are pretty hopeful of a win as the Brexiteers of the past referendum now have the proper insight and knowledge of the consequences of Brexit.

People supporting Brexit stated the over-bureaucratic nature of the union is responsible for the fast falling of the once used to be super powerful British. As per them, in order to continue the competition with countries like the United States and China, it has to change and get out of the Union which prohibits the freedom it requires.

Company News

Volkswagen and Ford Likely to Announce Alliance

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Volkswagen AG and Ford Motor Co may soon unveil an alliance to combine forces on commercial vehicles and may soon expand to electric vehicles and self-driving technologies. This move may save billions of dollars for both of the automakers.

Ford and Volkswagen will be soon declaring the alliance officially on Detroit auto show. As per VW Chief Herbert Diess, these two automakers have spent the last couple of months discussing cooperation in vans and other commercial vehicles. He also confirmed that the alliance would not involve any transfer of share or merger.

They also have scheduled a joint conference to provide more details of the alliance.

The two makers have confirmed that they had been looking for opportunities to cooperate with each other closely due to the recent trade frictions in the United States, Europe, and China.

The alliance also highlights the growing pressure amongst the automakers globally to manage the costs and develop electric or self-driving cars owing to the changes in legislation in many countries adopting strict emission standards.

The slowdown in the demand of cars in large markets like the United States, China has made the automakers to think about the cost cutting and advanced technology. The scope of the cooperation is yet to be ascertained fully as the talks are yet to be finalized on the area of electric cars and autonomous cars.

The alliance will let the two companies leverage upon each other’s unique capability. There might be a pooling of resources by the two companies for autonomous technology, and Ford might license Volkswagen’s MEB electric vehicles platform.

VW has confirmed in the Detroit auto show that the alliance would help VW to gain access to Ford’s midsized Ranger pickup truck platform, as the primary objective of the alliance would be to explore more on commercial vehicles. But, that doesn’t mean the alliance would be limited to commercial vehicle and electric vehicles. They would constantly be looking forward to other joint projects.

Executives of both these companies have talked about the deeper advantages of having this alliance. VW could use Ford’s plant to make vehicles whereas Ford might use the electric vehicle platform of VW.

The tie-up with Volkswagen will be a significant step for the Chief Executive of Ford Jim Hackett since he took over in May 2017 from the ousted Mark Fields with the mandate to speed up decision-making and cut costs. And, Ford recently said that it would cut thousands of jobs and discontinue loss-making models in order to cut costs to be able to absorb the shock in the car market.

Trading News

US Warns German Companies of Sanctions Over Russian Links

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In a long-standing conflict between the United States and Russia, this time German companies will have to face the ire. The United States has warned German companies involved in the Russian-led Nord Stream 2 gas pipeline that they may face sanctions if they choose to continue with the project.

US president Donald Trump has accused Germany of being a captive of Russia as it is heavily reliant on Russian energy and urged German companies to stop work at the earliest in the $11 billion gas pipeline project.

The pipeline since its plan formulation days has been criticized heavily as it will pass through Baltic Sea direct from Russia to Germany. It would bypass Ukraine depriving the country of lucrative gas transit fees. This may make Ukraine more economically vulnerable.

US Ambassador Richard Grenell has sent letters stating the same to various companies, as per the Embassy’s statement. The Embassy spokesperson said the letter reminds that any company operating in the Russian energy export pipeline sector is in danger under CAATSA of US sanctions and also added that other European countries had opposed this pipeline.

Germany along with its allies in the whole Europe alleged that the United States by using its Countering America’s Adversaries Through Sanctions Act (CAATSA) is trying to influence the country’s foreign and energy policies.

The Russian giant Gazprom is implementing the project along with western partners Uniper, Wintershall, Engie, OMV, and Shell.

The letter has created much talk in the Chancellor’s own Government. As per the sources, Chancellor Angela Merkel will direct take this issue with Washington as the ambassador’s letter did not follow the common diplomatic practice.

Juergen Hardt, the foreign policy spokesman for Merkel’s conservatives in parliament, said that the US ambassador’s direct threatening letter to the German companies is not acceptable. The letter demeans the tone of the transatlantic relationship. He also added that if the United States President wants to act tough on Russia in public, instead of targeting German companies he should first clear the air above his alleged relationship with the Russian regime.

The German companies that have received the letter denied making any official comment on the whole issue.

However, German and Russia also did not share a good relationship after Russia’s Crimea accession from Ukraine in 2014. But, both the countries had to advance the plan as they have common interests in the Nord Stream 2 project, which has the capacity to double the load of existing Nord Stream 1 route.

Russian Advantage-

German newspaper Bild am Sonntag reported that the letter from the Ambassador would only help Russia to have leverage on the gas pipeline project in future.

As per the spokesperson in US embassy, the letter is a coordinated effort by several US government agencies; it was never meant to be a threat letter but a letter stating the US policy clearly.

German Foreign Minister Heiko Maas said that the US sanctions on Nord Stream 2 pipeline project would be a wrong step for solving the dispute. The United States should stop meddling in the internal affairs of the European Countries and let the European countries decide their own energy policy.