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Stocks Lose Momentum, Dollar Softens After Democrats Win U.S. House

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Stocks Lose Momentum, Dollar Softens After Democrats Win U.S. House

Wall Street stock futures and Asian shares lost steam on Wednesday after Democrats won control of the U.S. House of Representatives, boosting the party’s ability to block President Donald Trump’s political and economic agenda.

But European stocks were expected to rise, with spread-betters looking at gains of up to 0.5 percent in Britain’s FTSE, 0.8 percent in France’s CAC and 0.7 percent in Germany’s DAX.

The Democrats’ House win creates a hurdle for Republicans to easily pass legislation through both chambers of Congress, clouding the outlook for some of Trump’s key economic proposals.

Major U.S. broadcasters projected the Democrats were headed to a gain of more than 30 seats, well beyond the 23 they needed to claim their first majority in the House in eight years, while the Republicans were seen gaining a few more seats in the Senate.

While both outcomes were broadly in line with market expectations, a reason markets did not sell off, the prospect of political gridlock creates some uncertainty for investors. The dollar weakened against most of its major counterparts.

“In the short term, a Republican loss in the House should amplify risk market volatility, detract from positive sentiment, and be positive for U.S. rates,” said Ed Al-Hussainy, senior rates and currency analyst at Columbia Threadneedle Investments at Minneapolis in the United States.

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“Long dollar and short Treasury futures positioning is relatively stretched going into tonight and could exaggerate short term moves in these prices,” he added.

In addition, the newly empowered House Democrats will have the ability to investigate Trump’s tax returns, possible business conflicts of interest and allegations involving his 2016 campaign’s links to Russia.

In equities markets, U.S. S&P500 futures ESc1 last traded 0.1 percent higher and MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS were up a similar amount, but they were far off highs hit earlier.

Japan’s Nikkei ended down 0.3 percent, giving up morning gains.

“It has clearly become difficult for Republicans to pass additional tax cuts or amendments to Dodd-Frank regulations (on financial institutions) for instance,” said Tomoaki Shishido, fixed income analyst at Nomura Securities.

Market sentiment had been volatile in Asian trade with stocks and the dollar swinging on the Republicans’ fluctuating prospects of retaining the House.

While a split Congress would put a brake on Trump’s agenda, such as tax cuts or deregulation, some investors think the Democrats may agree to more spending.

“There are still areas with compromise for spending, so even with a split government I expect more fiscal stimulus ahead. There is some possibility for compromise on infrastructure spending as well,” said Steve Friedman, New York-based senior economist at BNP Paribas Asset Management.

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“If there is additional fiscal stimulus, it suggests that fiscal policy is more of a tailwind for U.S. growth and it should, all things equal, be supportive for stocks.”

On the other hand, many investors expect Trump to continue to take a hard line on tariffs, which he can impose without Congressional approval, and foreign policy.

That keeps alive worries about a trade war between China and the United States.

Trump’s massive tax cut, enacted in December, and a spending agreement reached in Congress in February have helped lift the U.S. economy, but they have also widened the federal budget deficit.

As a result, Treasury supply has been growing, pushing U.S. bond yields higher.

The election results pushed down the 10-year U.S. Treasuries yield about 2.5 basis points to 3.189 percent, off its seven-year high of 3.261 percent touched a month ago.

But the debt market also remains under pressure from this week’s record volumes of longer-dated government debt supply.

In the currency market, the dollar dipped.

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Against the yen, it was 0.3 percent lower at 113.13, reversing earlier gains to one-month high of 113.82 yen.

The euro rose 0.15 percent to $1.1446 and the British pound gained 0.1 percent to $1.3117, hitting a three-week high.

Sterling extended gains made the previous day on hopes of a Brexit deal breakthrough after Brexit Secretary Dominic Raab said “Thumbs Up” on his way out of a cabinet meeting.

That helped sterling recover losses following remarks from a senior member of the Northern Irish Democratic Unionist Party earlier that it looked like Britain would exit the EU without a deal.

Oil prices were soft after a 2 percent fall the previous day. U.S. crude futures hit an eight-month low as Washington granted sanction waivers to top buyers of Iranian oil and as Iran said it has so far been able to sell as much oil as it needs to.

U.S. West Texas Intermediate (WTI) crude CLc1 futures traded 0.6 percent lower at $61.85 a barrel having hit a low of $61.31 on Tuesday, the weakest price since March 16.

International Brent crude LCOc1 futures fell 0.25 percent to $71.95, after hitting a low of $71.18 on Tuesday, its lowest since Aug. 16.

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CBN, SEC Grant Approval In Principle To Access And Diamond Bank Amid Merger

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CBN SEC Grant Approval IN Principle To Access And Diamond Bank On Proposed Merger

The Central Bank of Nigeria and the Securities Exchange Commission have granted an approval in principle to Access Bank and Diamond Bank on their proposed merger.

An Access Bank Executive Director, Victor Etuokwu, says the banks were expecting the final approval to come after the banks’ shareholders meetings.

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Etuokwu said the banks have received two of three approvals needed for the process, and that the final approval would be completed in the next sixty days.

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Etuokwu said the new bank that would emerge after the merger would focus on retail and corporate banking.

Robert Giles in charge of retail at Diamond Bank says customers will be able to use Automated Teller Machines, ATMs, of either bank at no cost.

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Maritime Expert Urges FG To Develop Policies To Boost Ship Ownership In Nigeria

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Maritime Expert Urges FG To Develop Policies To Enable Ship Ownership In Nigeria

The federal government has been asked to develop policies that would help increase local ship ownership that would help in the training of Nigerian seafarers.  Currently, there are no locally-owned ships operating in international waters.

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The call was made in Abuja on Tuesday by Mfon Ekong Usoro, secretary-general of the Abuja M.O.U. On Port State Control for West and Central African Region.

She said the absence of locally-owned vessels trading at the international stage has reduced opportunities for hand-on experience for Nigerian seafarers.

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Usoro said this has reduced the abilities of Nigerian seafarers to compete against their contemporaries around the world in areas of international shipping.

She called on NIMASA to invest in a training ship like that of South Africa’s Samsa and create berths for sea training for Nigerian seafarers.

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China Central Bank Injects $83 Billion Into Economy

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China: Central Bank Injects $83 Billion Into Economy

China’s central bank has on Wednesday injected a record $83 billion into the country’s financial system in order to avert a cash crunch that could destabilise the country’s economy.

The country’s weakening economy has made policymakers to step up stimulus measures in protecting jobs,

But a raft of measures last year from big rail projects to tax cuts seem to have had little impact so far, with recent data suggesting activity is cooling more quickly than expected.

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A senior economist in Hong Kong, Trinh Nguyen said, it is very obvious the economy of China needs help and so many authorities agreed to that.

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Wednesday’s injection was aimed at ensuring there are ample funds in the financial system, which is facing strains as tax payments peak in mid-January, and as demand for cash picks up ahead of the Lunar New Year holidays starting in early February, People’s Bank of China (PBOC) said.

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The injection which is the bank’s largest net single-day injection came a day after China’s state planner, central bank and finance ministry all offered reassurances to investors, signaling more spending and other types of policy support.

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