Editor Brian Harrod Provides Comprehensive up-to-date news coverage, with aggregated news from sources all over the world from the Roundup Newswires Network
Sharp declines come after Tuesday rally inspired by tariff delays
Trump urges Fed chief Powell to make further interest rate cuts
Signs of a global economic slowdown roiled the markets on Wednesday as shares dived and investors fled to bonds with such intensity that short-term yields rose above longer-term ones for the first time since the crisis of a decade ago – an inversion many market-watchers saw as a strong signal of an approaching recession.
A degree of calm has returned to world stock markets, after heavy selling earlier this week amid fears that the one-year trade war between the US and China was turning into a full-blown currency war. Washington branded Beijing a currency manipulator after the yuan fell sharply beyond the seven-to-one-dollar mark on Monday. This led to turmoil in financial markets – and US and UK stocks had their worst day this year.
The pound is declining again today and is trading close to two-year lows versus the dollar and the euro. It is down 0.21% against the dollar at $1.2145, not far from the 31-month low of $1.2080 reached last week. Against the euro, sterling is 0.12% lower at €1.0855, not far from the 23-month low hit yesterday.
The risk of a no-deal Brexit has increased markedly under Boris Johnson’s government. When he became prime minister a fortnight ago, he said he would take Britain out of the EU at the end of October “do or die”. Investors are also fretting about the possibility of a no-confidence vote in the new Conservative government after the summer recess, or an early general election.
There are many key dates ahead for sterling, but the passing of 5 September without a successful of no confidence in the government will in our view be a further important step along the road of a no-deal Brexit on 31 October.
The mood in financial markets is still fragile. Oil prices have hit a fresh seven-month low as traders worried about the impact of the US-China trade war on the global economy.
Brent crude, the global benchmark, fell nearly 2% to $58.57 a barrel earlier this morning and is now trading down 0.2% at $58.82 a barrel. Prices have tumbled more than 20% since hitting their 2019 peak in April.
Gold has hit a fresh six-year high, rising above $1,473 this morning, after Beijing hit back at Washington’s branding of the country as a currency manipulator.
Asian stock markets were painted red overnight but shares in Europe have stabilised, no doubt helped by the strong factory orders data from Germany this morning. Germany’s Dax has risen 0.46%, France’s CAC is up 0.67%, Spain’s Ibex has edged 0.09% higher and Italy’s FTSE MiB is 0.25% ahead.
UBS, the Swiss investment bank, has sent us its analysis of the impact of the 10% tariff on $300bn of US imports from China threatened by Donald Trump last Friday.
The direct impact of the new tariffs, if implemented, would reduce US GDP by 0.15%, and we estimate Chinese GDP growth in the next 12 months could fall by 0.25–0.5 percentage points as a result, which would push the country’s growth rate below 6% into 2020.
China’s response to recent trade escalations has been relatively measured and we expect a similar reaction this time, with retaliation involving a mix of more tariffs and non-tariff measures. Potential non-tariff measures include a managed depreciation of the yuan to mitigate the trade impact from higher tariffs, penalising select US companies operating in China, and imposing export restrictions on rare earth metals.
There is still time to find a compromise, trade talks between the US and China scheduled for September have not been called off, and investors should also consider potential offsetting factors such as rate cuts by central banks and stimulus in China. Our base case assumes a long, drawn-out negotiation process, during which tensions can occasionally flare up.
An environment of a) rising trade tensions and b) potential stimulus, including falling interest rates, is tricky for investors to navigate. While we ultimately believe that US–China tradetensions will be resolved through negotiations, we think equities may struggle to move markedly higher until there is greater certainty.
Markets fell sharply as Trump threatens fresh tariffs; US non-farm payrolls matched economists’ expectations in July, while June figures were revised down
The Bank of Finland governor Olli Rehn has confirmed that he has withdrawn from the race to become the next managing director of the International Monetary Fund.
EU is about to vote on Europe’s candidate for IMF managing director. It is an exceptionally meaningful and motivating job. However, at this stage I withdraw my name from the ballot, so that we can achieve a broad-based consensus for the European candidate, and world-wide support.
Star listing of domestic tech firms is seen as an attempt to bypass US markets in trade war
China’s tech scene was handed a fresh vote of confidence as investors piled into Shanghai’s new Nasdaq-style stock exchange and sent shares skyrocketing up to 500%.
The launch of the Star listing of domestic tech firms is seen as China’s answer to the US’s Nasdaq, and an attempt to sidestep American markets in its long-running trade war with Washington.
- the employment level is at a record high - there are 3.7m more people in work than in 2010 - wages have grown faster than inflation for almost a year - female unemployment has fallen to a new record low of 3.6% pic.twitter.com/V9C5NMXW9l
Andy Bruce of Reuters has also spotted that rising self-employment is making up for a drop in the number of employed workers.
Cause for concern?
That there was any employment growth at all in 3 months to May is down to a hefty increase in self-employment.
If you’re just tuning in, here’s our news story on the Chinese growth figures.... and president Trump’s response.
Donald Trump has claimed that his tariff battle with China is working after official data from Beijing showed growth in the world’s second biggest economy dropping to its slowest pace since 1992.
The US president said the impact of his protectionist measures had been to cause an exodus of companies from China, as Beijing announced that its annual rate of expansion had slowed from 6.4% to 6.2% in the second quarter of 2019.
In tweets that were immediately challenged by economists, Trump said his tough action had forced China’s leaders to the negotiating table.
European stock markets ended the day higher, blown upwards by hopes of fresh Chinese stimulus measure to prop up growth.
After a brief stint in the red the FTSE has powered higher on Monday as risk on dominated. Better than expected results from Citigroup boosting Wall Street and the prospect of stimulus for China lifted the FTSE at the start of the week.
Chinese GDP data showed that the economy grew by 6.2% its lowest level of growth in almost a decade. However, rather than depressing the market, hopes of stimulus for the world’s second largest economy have boosted risk appetite, lifting demand for riskier assets such as stocks. Just as we are seeing with the US, the prospect of easing financial conditions is not being interpreted as bad news for stocks. Instead the prospect of cheaper borrowing in the case of the Fed and support from the PBOC is giving investors plenty of confidence to buy in.
Iran hasn’t said who it thinks is responsible for today’s attacks off its coastline.
But on Twitter, foreign minister Javad Zarif has described the attacks as beyond suspicious:
Reported attacks on Japan-related tankers occurred while PM @AbeShinzo was meeting with Ayatollah @khamenei_ir for extensive and friendly talks.
Suspicious doesn't begin to describe what likely transpired this morning.
Iran's proposed Regional Dialogue Forum is imperative.
Here’s the key line from president Rouhani’s speech on Iranian TV:
“Security is of high importance to Iran in the sensitive region of the Persian Gulf, in the Middle East, in Asia and in the whole world. We have always tried to secure peace and stability in the region.”
Let’s get some details on the weakest US jobs report in three months.
The government cut 15,000 jobs in May, according to the Bureau of Labor Statistics, while private companies hired 90,000 people.
The unemployment rates for adult men (3.3 percent), adult women (3.2 percent), teenagers (12.7 percent), Whites (3.3 percent), Blacks (6.2 percent), Asians (2.5 percent), and Hispanics (4.2 percent) showed little or no change in May.
He also fears that British manufacturing could continue to shrink in the comping months.
The trend in output weakened and, based on its relationship with official ONS data, is pointing to a renewed downturn of production.
“New order inflows declined from both domestic and overseas markets, as already high stock levels at manufacturers and their clients led to difficulties in sustaining output levels and getting agreement on new contracts.
Newsflash: Britain’s factory sector has suffered its worst contraction since the EU referendum almost three years ago.
Data firm Markit reports that new orders and employment both declined last month, hit by Brexit uncertainty and the knock-on impact of the US-China trade war.
New order inflows deteriorated from both domestic and overseas sources. New export business fell for the second month running and at the quickest pace in over four-and-a- half years. Manufacturers reported lower demand from Asia and Europe.
There was also mention of Brexit uncertainty, including clients diverting supply chains away from the UK, leading to lower demand from within the EU.
After 5% tariff announced, president tweets ‘Mexico has taken advantage of the US for decades’
Donald Trump has defended his decision to impose new tariffs on Mexico as stock markets worldwide were rattled by fears of an escalation in trade tensions.
“Mexico has taken advantage of the United States for decades,” Trump tweeted. “Because of the Dems, our Immigration Laws are BAD. Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. Time for them to finally do what must be done!”
Dow Jones slumps after Beijing signals readiness to restrict exports of rare-earth elements
Financial markets around the world have sold off sharply after Beijing signalled a readiness to strike back at Washington in their escalating trade war by restricting exports of rare-earth elements.
Wall Street recorded steep losses on Wednesday as the Dow Jones slumped to the lowest level in almost four months, losing about 200 points to trade at 25,149. The S&P 500 index also fell to a two-month low, sliding by 18 points to 2,784.
Shares fall sharply in Asia, Europe and North America in intensifying war of words
The deepening trade and technology war between the US and China has sent global stock markets sharply lower and prompted a warning from the IMF of the increasing risks to the global economy.
Shares fell sharply in Asia, Europe and North America on a day that saw investors alarmed by the intensifying war of words between Washington and Beijing, poor news on the American economy, and political chaos in Britain.
Stock traded considerably lower than $100bn the ride-hailing app had hoped to achieve
Uber’s hopes of a surge in the price of its shares have fallen flat, as investors gave the taxi-hailing app’s eagerly anticipated stock market float a frosty reception by sending the shares below their launch price.
Uber put a price of $45 on its shares valuing the company at $80bn (£61.4bn) – well below the $100bn it had once hoped to achieve – amid jitters among investors at the lacklustre performance of shares in rival Lyft since its recent float.
Biggest fall since October 2012 follows worse-than-expected quarterly results
Google’s share price has had its biggest fall in nearly seven years, wiping $70bn (£54bn) off its market value, after disappointing sales figures sparked investor fears that advertisers have been shifting their business to digital rivals such as Facebook and Amazon.
Shares in Alphabet, the parent company of Google and YouTube, fell at one point by more than 8% on Tuesday, the biggest fall since October 2012, after the company produced first quarter results on Monday that were worse than expected.
Erdoğan’s costly move against currency speculators could prove to have major ripple effects
The battle waged by Turkey’s Recep Tayyip Erdoğan against currency speculators is a classic pyrrhic victory. The show of resolve by the self-styled strongman on Wednesday stopped investors from dumping the lira but at enormous cost in both the short and long term. That Turkey will be damaged is beyond question. All that’s in doubt is how severe that damage will be and whether the fallout will be felt elsewhere. Looking at the fragile state of the global economy, there’s every chance it will be.
The backdrop to the latest instalment of a long-running crisis is that Erdoğan is this week facing important local elections at a time when the Turkish economy is in recession. In an attempt to drum up support, Turkey’s president last week condemned Donald Trump’s decision to recognise Israeli control over the Golan heights, but this proved a spectacular own goal by convincing foreign investors that Ankara was on a collision course with Washington. The lira plunged.
Bond yields also continued to fall across the world with Australian 10-year treasury yields falling to a record low on Monday of 1.756% in what analysts see as a strong indicator of a downturn hitting the resource-rich country.
Mark Carney is then asked about activist investor Edward Bramson, who has used a $1.4bn loan from Bank of America to buy his stake in Barclays (and agitate for a board seat),
Q: Would that loan affect his ability to meet the City’s ‘fit and proper person’s test’?
Earlier in the hearing, Mark Carney suggested that that City has underestimated future interest rate hikes.
The governor pointed out that Bank of England’s most recent economic forecasts - based on market expectations of borrowing costs - showed inflation above the BoE’s target over its three-year forecast period
“In other words, the path of interest rates is not firm enough, it’s not quite high enough for us to be fulfilling our mandate, which sends a broad signal in terms of the stance of policy.”