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| Markets move higher as Japanese growth beats forecasts - business live | Markets move higher as Japanese growth beats forecasts - business live |
| (35 minutes later) | |
| 8.53am BST | |
| 08:53 | |
| In another sign of the calmer mood at the start of the new week, the VIX volatility index has fallen back after last week hitting its highest level since President Trump was elected. | |
| Kit Juckes at Societe Generale said: | |
| All is relatively calm, all is relatively quiet on the geopolitical front and long may that last. Markets are, as a result, trying to get back to biz-as-usual. Yields are slightly higher in bond-land, equity indices finding their feet, bitcoin making new highs seemingly ad infinitum. | |
| Updated | |
| at 8.54am BST | |
| 8.28am BST | 8.28am BST |
| 08:28 | 08:28 |
| Trump could struggle to meet economic targets - S&P | Trump could struggle to meet economic targets - S&P |
| President Trump has problems everywhere - from the tensions with North Korea to the death of a woman at a weekend anti-racism rally - and his economic plans could also be in trouble. | President Trump has problems everywhere - from the tensions with North Korea to the death of a woman at a weekend anti-racism rally - and his economic plans could also be in trouble. |
| That’s the view of S&P Global ratings, which says Trump could struggle to meet economic growth targets. In a new report it says: | That’s the view of S&P Global ratings, which says Trump could struggle to meet economic growth targets. In a new report it says: |
| After the failure of the Republican plan to “repeal and replace” the Affordable Care Act, S&P Global Ratings believes the prospects for the administration to work with lawmakers to enact its promised pro-growth plans are, in a word, dim, said an article published today, titled “The Departed: Can U.S. Lawmakers Spur GDP Growth When They Return?.” | After the failure of the Republican plan to “repeal and replace” the Affordable Care Act, S&P Global Ratings believes the prospects for the administration to work with lawmakers to enact its promised pro-growth plans are, in a word, dim, said an article published today, titled “The Departed: Can U.S. Lawmakers Spur GDP Growth When They Return?.” |
| “We no longer believe the federal government will be able to push through even a small infrastructure-spending package--much less the $1 trillion the White House has suggested,” said U.S. Chief Economist Beth Ann Bovino. | “We no longer believe the federal government will be able to push through even a small infrastructure-spending package--much less the $1 trillion the White House has suggested,” said U.S. Chief Economist Beth Ann Bovino. |
| We still expect a small tax cut of $500 billion, rather than true tax reform, to be passed early next year as midterm elections approach. S&P global has argued that permanence is key to making tax reform effective, which would require bipartisan support. | We still expect a small tax cut of $500 billion, rather than true tax reform, to be passed early next year as midterm elections approach. S&P global has argued that permanence is key to making tax reform effective, which would require bipartisan support. |
| “With U.S. economic growth stuck at around 2% and as the baby boomers retire, the administration’s plans to cut immigration would likely put the U.S. on the path to even slower rates of economic growth,” said Ms. Bovino. | “With U.S. economic growth stuck at around 2% and as the baby boomers retire, the administration’s plans to cut immigration would likely put the U.S. on the path to even slower rates of economic growth,” said Ms. Bovino. |
| Hard-tariff policies could provoke a messy scenario in which the U.S.’s trade partners could retaliate in some way. But a limited restriction, which we think seems more likely at this point, may be more symbolic than a meaningful hit to aggregate flows. We expect the current expansionary period--now in its ninth year and the third-longest since World War II--to continue into 2018--with little help from Uncle Sam--albeit at a modest pace. | Hard-tariff policies could provoke a messy scenario in which the U.S.’s trade partners could retaliate in some way. But a limited restriction, which we think seems more likely at this point, may be more symbolic than a meaningful hit to aggregate flows. We expect the current expansionary period--now in its ninth year and the third-longest since World War II--to continue into 2018--with little help from Uncle Sam--albeit at a modest pace. |
| 8.13am BST | 8.13am BST |
| 08:13 | 08:13 |
| European markets open higher | European markets open higher |
| As expected, shares are moving ahead in early trading as some of the volatility of the past week eases. | As expected, shares are moving ahead in early trading as some of the volatility of the past week eases. |
| The FTSE 100 is up 0.25%, with Standard Life up 2% as it completes its merger with Aberdeen. | The FTSE 100 is up 0.25%, with Standard Life up 2% as it completes its merger with Aberdeen. |
| France’s Cac has climbed 0.4%, Italy’s FTSE MIB is up 0.57% and Germany’s Dax has opened 0.7% better. Konstantinos Anthis at ADS Securities said: | France’s Cac has climbed 0.4%, Italy’s FTSE MIB is up 0.57% and Germany’s Dax has opened 0.7% better. Konstantinos Anthis at ADS Securities said: |
| There is strong fundamental backing behind the major equity markets - with the low interest rates policies being the key catalyst - so stock traders will probably find the opportunity to re-establish their long bets at lower prices after the recent pullback. | There is strong fundamental backing behind the major equity markets - with the low interest rates policies being the key catalyst - so stock traders will probably find the opportunity to re-establish their long bets at lower prices after the recent pullback. |
| 7.52am BST | 7.52am BST |
| 07:52 | 07:52 |
| The eurozone industrial production figures could show the effects of the recent strength of the euro. The single currency has benefitted from weakness elsewhere, particularly in the dollar, but this is causing a problem for the European Central Bank. President Mario Draghi is under pressure to begin easing the central bank’s quantitative easing and low interest rate policy, but a stronger euro makes that more tricky. Commenting on today’s expected data, Dave Madden at CMC Markets said: | The eurozone industrial production figures could show the effects of the recent strength of the euro. The single currency has benefitted from weakness elsewhere, particularly in the dollar, but this is causing a problem for the European Central Bank. President Mario Draghi is under pressure to begin easing the central bank’s quantitative easing and low interest rate policy, but a stronger euro makes that more tricky. Commenting on today’s expected data, Dave Madden at CMC Markets said: |
| The consensus is for a reading of -0.4% and 2.9% on a month-on-month basis and on a year-on-year basis respectively. The relative strength of the euro is hitting the region, and traders want to see if that is still the case. | The consensus is for a reading of -0.4% and 2.9% on a month-on-month basis and on a year-on-year basis respectively. The relative strength of the euro is hitting the region, and traders want to see if that is still the case. |
| 7.48am BST | 7.48am BST |
| 07:48 | 07:48 |
| The agenda: Japanese growth beats forecasts | The agenda: Japanese growth beats forecasts |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| After last week’s market turmoil in the wake of growing tensions and belligerent rhetoric between North Korea and the US, the week looks like starting on a calmer note. As Kathleen Brooks at City Index put it: | After last week’s market turmoil in the wake of growing tensions and belligerent rhetoric between North Korea and the US, the week looks like starting on a calmer note. As Kathleen Brooks at City Index put it: |
| The fact that we didn’t see an escalation in the rhetoric from either side over the weekend could be enough to trigger a recovery after last week’s risk selloff, and keep the markets focused on the economic fundamentals. | The fact that we didn’t see an escalation in the rhetoric from either side over the weekend could be enough to trigger a recovery after last week’s risk selloff, and keep the markets focused on the economic fundamentals. |
| President Trump of course now has some rather pressing domestic concerns to deal with after a woman was killed at an anti-racism rally over the weekend. | President Trump of course now has some rather pressing domestic concerns to deal with after a woman was killed at an anti-racism rally over the weekend. |
| As for the economic fundamentals, there has already been some positive news from Japan in the form of forecast-beating growth figures. The country’s second quarter GDP grew by 1% quarter on quarter or 4% in annualised terms, which was higher than the 2.5% expected. Economist Rob Carnell at ING Bank said: | As for the economic fundamentals, there has already been some positive news from Japan in the form of forecast-beating growth figures. The country’s second quarter GDP grew by 1% quarter on quarter or 4% in annualised terms, which was higher than the 2.5% expected. Economist Rob Carnell at ING Bank said: |
| That makes Japan the fastest growing economy in the G7 this quarter by our reckoning and may re-start the chatter about the Bank of Japan’s eventual QQE [Qualitative Monetary Easing] exit strategy.... | That makes Japan the fastest growing economy in the G7 this quarter by our reckoning and may re-start the chatter about the Bank of Japan’s eventual QQE [Qualitative Monetary Easing] exit strategy.... |
| This was not one of those flukey one-offs that was caused by a surge in inventories that will be worked down in coming quarters, or one of those random spikes caused by exports and imports growing out of synch. | This was not one of those flukey one-offs that was caused by a surge in inventories that will be worked down in coming quarters, or one of those random spikes caused by exports and imports growing out of synch. |
| Although it is usually exactly the wrong thing to respond to volatile Japanese GDP data by revising full year forecasts, arithmetically, it is going to be hard for us to see only the 1.2% for 2017 we currently have pencilled in, and an upgrade now seems extremely likely. | Although it is usually exactly the wrong thing to respond to volatile Japanese GDP data by revising full year forecasts, arithmetically, it is going to be hard for us to see only the 1.2% for 2017 we currently have pencilled in, and an upgrade now seems extremely likely. |
| Elsewhere Chinese retail sales and industrial production rose by 10.4% and 6.4% respectively in July, but this was slightly below analyst forecasts. | Elsewhere Chinese retail sales and industrial production rose by 10.4% and 6.4% respectively in July, but this was slightly below analyst forecasts. |
| Even so the Nikkei 225 is up around 0.98% and the Hang Seng is 1.16% better, as investors focussed on the Japanese data. European markets are also forecast to open higher: | Even so the Nikkei 225 is up around 0.98% and the Hang Seng is 1.16% better, as investors focussed on the Japanese data. European markets are also forecast to open higher: |
| Our European opening calls:$FTSE 7321 +0.15%$DAX 12044 +0.25%$CAC 5071 +0.20%$IBEX 10299 +0.16%$MIB 21420 +0.31% | Our European opening calls:$FTSE 7321 +0.15%$DAX 12044 +0.25%$CAC 5071 +0.20%$IBEX 10299 +0.16%$MIB 21420 +0.31% |
| It is a thin day for economic data otherwise. | It is a thin day for economic data otherwise. |
| The agenda: | The agenda: |
| 10 BST Eurozone Industrial Production figures | 10 BST Eurozone Industrial Production figures |