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| IMF warns on trade wars; China's economic growth slows – as it happened | |
| (about 4 hours later) | |
| And finally, London’s stock market closed lower tonight amid. | |
| The FTSE 100 lost 61 points to end at 7,600, a fall of 0.8%. Miners and oil companies were among the fallers, following the slowdown in Chinese growth and persistent worries about trade spats. | |
| Fiona Cincotta of City Index explains: | |
| The FTSE fell heavily on Monday, dipping below 7600, as commodity stocks and a stronger pound weighed on the index. With the Chinese economy expanding at a slightly slower pace in Q2, metal prices tumbled, causing mining stocks to trace the price lower, which oil majors slipped as oil tumble 3%. | |
| Given the heavy weighting of resource stocks on the FTSE, the blue-chip index lagged significantly behind its European peers. | |
| Germany’s DAX had a better day, up 0.16% while France’s CAC dipped by 0.3% as the Paris exchange enjoyed a quiet session after the World Cup final. | |
| Goodnight! GW | |
| Here’s our economics correspondent Richard Partington on the IMF’s new economic forecasts: | Here’s our economics correspondent Richard Partington on the IMF’s new economic forecasts: |
| Rising trade tensions between the United States and the rest of the world could cost the global economy $430bn (£324bn), with America “especially vulnerable” to an escalating tariff war, the International Monetary Fund has warned. | Rising trade tensions between the United States and the rest of the world could cost the global economy $430bn (£324bn), with America “especially vulnerable” to an escalating tariff war, the International Monetary Fund has warned. |
| Delivering a sharp rebuke for Donald Trump, the Washington-based organisation said the current threats made by the US and its trading partners risked lowering global growth by as much as 0.5% by 2020, or about $430bn in lost GDP worldwide. | Delivering a sharp rebuke for Donald Trump, the Washington-based organisation said the current threats made by the US and its trading partners risked lowering global growth by as much as 0.5% by 2020, or about $430bn in lost GDP worldwide. |
| Although all economies would suffer from further escalation, the US would find itself “as the focus of global retaliation” with a relatively higher share of its exports taxed in global markets. “It is therefore especially vulnerable,” the fund said. | Although all economies would suffer from further escalation, the US would find itself “as the focus of global retaliation” with a relatively higher share of its exports taxed in global markets. “It is therefore especially vulnerable,” the fund said. |
| IMF warns Trump trade war could cost global economy $430bn https://t.co/ImWnMYVOLo | IMF warns Trump trade war could cost global economy $430bn https://t.co/ImWnMYVOLo |
| Just in: CNBC are reporting that Goldman Sachs will name their new CEO tomorrow morning. | Just in: CNBC are reporting that Goldman Sachs will name their new CEO tomorrow morning. |
| David Solomon, currently president of Goldman Sachs, will be promoted to succeed Lloyd Blankfein, they say. | David Solomon, currently president of Goldman Sachs, will be promoted to succeed Lloyd Blankfein, they say. |
| That wouldn’t be a surprise; Solomon has been in poll position for the top job since rival Harvey Schwartz stepped down four months ago. | That wouldn’t be a surprise; Solomon has been in poll position for the top job since rival Harvey Schwartz stepped down four months ago. |
| Solomon is known as a food fanatic and music fan (spinning vinyl as “DJ D-Sol”).... | Solomon is known as a food fanatic and music fan (spinning vinyl as “DJ D-Sol”).... |
| The IMF expects advanced economies to slow next year, while emerging markets will power on. | The IMF expects advanced economies to slow next year, while emerging markets will power on. |
| Advanced economies’ growth is expected to remain above trend at 2.4% in 2018 before easing to 2.2 percent in 2019 https://t.co/0XUacVSx69 pic.twitter.com/uqamGr7C9X | Advanced economies’ growth is expected to remain above trend at 2.4% in 2018 before easing to 2.2 percent in 2019 https://t.co/0XUacVSx69 pic.twitter.com/uqamGr7C9X |
| But these forecasts could turn to dust if the tit-for-tar trade dispute turns into an damaging trade war. | But these forecasts could turn to dust if the tit-for-tar trade dispute turns into an damaging trade war. |
| The IMF’s Maurice “Maury” Obstfeld is speaking now, warning that the global recovery has plateaued and become less balanced. | The IMF’s Maurice “Maury” Obstfeld is speaking now, warning that the global recovery has plateaued and become less balanced. |
| Obstfeld says: | Obstfeld says: |
| We continue to project global growth rates of just about 3.9 percent for both this year and next, but judge that the risk of worse outcomes has increased, even for the near term. | We continue to project global growth rates of just about 3.9 percent for both this year and next, but judge that the risk of worse outcomes has increased, even for the near term. |
| He points out that growth has slowed recently in the eurozone, Japan and the UK (which is why the IMF has trimmed their growth forecasts). | He points out that growth has slowed recently in the eurozone, Japan and the UK (which is why the IMF has trimmed their growth forecasts). |
| Obstfeld says Europe looks less stable than three months ago (before Italy’s populist government was sworn in, and Germany’s coalition was split over migration). He explains: | Obstfeld says Europe looks less stable than three months ago (before Italy’s populist government was sworn in, and Germany’s coalition was split over migration). He explains: |
| Political uncertainty has risen in Europe, where the European Union faces fundamental political challenges regarding migration policy, fiscal governance, norms concerning the rule of law, and the euro area institutional architecture. The terms of Brexit remain unsettled despite months of negotiation. | Political uncertainty has risen in Europe, where the European Union faces fundamental political challenges regarding migration policy, fiscal governance, norms concerning the rule of law, and the euro area institutional architecture. The terms of Brexit remain unsettled despite months of negotiation. |
| Obstfeld also warns that financial markets seem “broadly complacent” about the risks of a trade war, and the geopolitical tensions rising across the world. | Obstfeld also warns that financial markets seem “broadly complacent” about the risks of a trade war, and the geopolitical tensions rising across the world. |
| Newsflash: The International Monetary Fund has warned that hundreds of billions of dollars of growth will be wiped out, if a full-scale trade war breaks out. | Newsflash: The International Monetary Fund has warned that hundreds of billions of dollars of growth will be wiped out, if a full-scale trade war breaks out. |
| The IMF estimates that the global economy will be 0.5% smaller by 2020 if the various tariffs threatened by the US, China, Europe, Mexico, Japan and Canada are all implemented. | The IMF estimates that the global economy will be 0.5% smaller by 2020 if the various tariffs threatened by the US, China, Europe, Mexico, Japan and Canada are all implemented. |
| The warning comes in the IMF’s latest economic outlooks, which also cuts Europe’s growth predictions this year. | The warning comes in the IMF’s latest economic outlooks, which also cuts Europe’s growth predictions this year. |
| Maury Obstfeld, IMF Economic Counsellor, says: | Maury Obstfeld, IMF Economic Counsellor, says: |
| The risk that current trade tensions escalate further—with adverse effects on confidence, asset prices, and investment—is the greatest near-term threat to global growth. | The risk that current trade tensions escalate further—with adverse effects on confidence, asset prices, and investment—is the greatest near-term threat to global growth. |
| Global current account imbalances are set to widen owing to the United States’ relatively high demand growth, possibly exacerbating frictions. The United States has initiated trade actions affecting a broad group of countries, and faces retaliation or retaliatory threats from China, the European Union, its NAFTA partners, and Japan, among others. | Global current account imbalances are set to widen owing to the United States’ relatively high demand growth, possibly exacerbating frictions. The United States has initiated trade actions affecting a broad group of countries, and faces retaliation or retaliatory threats from China, the European Union, its NAFTA partners, and Japan, among others. |
| Our modeling suggests that if current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 percent below current projections by 2020. As the focus of global retaliation, the United States finds a relatively high share of its exports taxed in global markets in such a broader trade conflict, and it is therefore especially vulnerable. | Our modeling suggests that if current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 percent below current projections by 2020. As the focus of global retaliation, the United States finds a relatively high share of its exports taxed in global markets in such a broader trade conflict, and it is therefore especially vulnerable. |
| The IMF has lowered its forecast for eurozone growth this year to 2.2%, from 2.4% back in April. | The IMF has lowered its forecast for eurozone growth this year to 2.2%, from 2.4% back in April. |
| It has also cut its forecast for UK growth in 2018 to just 1.4%, from 1.6%. | It has also cut its forecast for UK growth in 2018 to just 1.4%, from 1.6%. |
| But it still expects the global economy to grow by 3.9% this year, and in 2019. | But it still expects the global economy to grow by 3.9% this year, and in 2019. |
| IMF maintains 2018 global GDP growth forecast at 3.9%Cuts Euro Area, Japan and UK forecasts pic.twitter.com/oa2tRFjnG3 | IMF maintains 2018 global GDP growth forecast at 3.9%Cuts Euro Area, Japan and UK forecasts pic.twitter.com/oa2tRFjnG3 |
| It’s pretty obvious that trade wars can make imports more expensive, as tariffs are effectively paid by consumers. | It’s pretty obvious that trade wars can make imports more expensive, as tariffs are effectively paid by consumers. |
| But they can also make domestic goods cheaper, if suppliers are left with a glut of products which they can no longer sell competively overseas. | But they can also make domestic goods cheaper, if suppliers are left with a glut of products which they can no longer sell competively overseas. |
| And this is already happening in America, where pork prices are falling on fears that China will stop importing as many US hams. | And this is already happening in America, where pork prices are falling on fears that China will stop importing as many US hams. |
| Bloomberg reports that hog futures are weak this year. And American meat lovers are already taking advantage, and tucking into some culinary treats..... | Bloomberg reports that hog futures are weak this year. And American meat lovers are already taking advantage, and tucking into some culinary treats..... |
| On Saturday in Dallas, as many as 30 people on a local bacon-focused food tour were set to traverse the city chomping down on bacon donuts, bacon brown sugar ice cream, bacon jam and candied bacon. While retail bacon prices are down in the past 12 months, they’re still up from six years ago, so any relief from higher costs will be welcome news to the pork enthusiasts. | On Saturday in Dallas, as many as 30 people on a local bacon-focused food tour were set to traverse the city chomping down on bacon donuts, bacon brown sugar ice cream, bacon jam and candied bacon. While retail bacon prices are down in the past 12 months, they’re still up from six years ago, so any relief from higher costs will be welcome news to the pork enthusiasts. |
| “It’s almost like a bonding experience,” said Jeanine Stevens, the owner of Dallas Bites! Tours, which takes participants to little known restaurants and other eateries. “Bacon is a kind of food that people just feel a little bit lighthearted about. It’s a fun food.” | “It’s almost like a bonding experience,” said Jeanine Stevens, the owner of Dallas Bites! Tours, which takes participants to little known restaurants and other eateries. “Bacon is a kind of food that people just feel a little bit lighthearted about. It’s a fun food.” |
| Donald Trump's trade wars are making pork a bargain 🐖🐖🐖🐖🐖https://t.co/9ECuX5VQa3 via @megandurisin @helloimjustina pic.twitter.com/d5owOUfkwU | Donald Trump's trade wars are making pork a bargain 🐖🐖🐖🐖🐖https://t.co/9ECuX5VQa3 via @megandurisin @helloimjustina pic.twitter.com/d5owOUfkwU |
| Vincent-Freědeěric Mivelaz of Switzerland’s SwissBank is concerned by today’s Chinese growth figures. | Vincent-Freědeěric Mivelaz of Switzerland’s SwissBank is concerned by today’s Chinese growth figures. |
| Mivelaz points out that there are signs of weakness, with fixed asset investment dropping from 6.1% to 6% per year in June, industrial production growth down to 6% from 6.8%, and retail sales growth below their recent average. | Mivelaz points out that there are signs of weakness, with fixed asset investment dropping from 6.1% to 6% per year in June, industrial production growth down to 6% from 6.8%, and retail sales growth below their recent average. |
| He adds: | He adds: |
| Money supply is tightening, due to caution of financiers and debt risk, so the Chinese economy is expected to slow down industrial activity and private consumption. Trade tariffs will be a key factor in coming months. | Money supply is tightening, due to caution of financiers and debt risk, so the Chinese economy is expected to slow down industrial activity and private consumption. Trade tariffs will be a key factor in coming months. |
| Here’s our Beijing correspondent, Lily Kuo, on China’s retaliation against America’s tariffs: | Here’s our Beijing correspondent, Lily Kuo, on China’s retaliation against America’s tariffs: |
| China has filed a complaint against the US at the World Trade Organisation over Donald Trump’s threats to place tariffs on an additional $200bn worth of Chinese goods. | China has filed a complaint against the US at the World Trade Organisation over Donald Trump’s threats to place tariffs on an additional $200bn worth of Chinese goods. |
| The one-sentence announcement on Monday, from China’s ministry of commerce, comes less than a week after the US president called for a second round of tariffs on China, in retaliation for Chinese tariffs placed on American goods. | The one-sentence announcement on Monday, from China’s ministry of commerce, comes less than a week after the US president called for a second round of tariffs on China, in retaliation for Chinese tariffs placed on American goods. |
| On 6 July, the US imposed 25% tariffs on $34bn in Chinese goods, prompting Beijing to hit back with levies on the same amount of US exports to China. In response, the White House last week released a wide-ranging list of $200bn in Chinese goods, from tobacco to dog and cat food, to target with 10% tariffs. Beijing said it would “fight back as usual” and would file a complaint with the WTO. | On 6 July, the US imposed 25% tariffs on $34bn in Chinese goods, prompting Beijing to hit back with levies on the same amount of US exports to China. In response, the White House last week released a wide-ranging list of $200bn in Chinese goods, from tobacco to dog and cat food, to target with 10% tariffs. Beijing said it would “fight back as usual” and would file a complaint with the WTO. |
| The new round of tariffs would not come into effect until September, making China’s response uncharacteristically quick. Up to now Beijing has waited for the US to “fire the first shot” in the escalating trade war... | The new round of tariffs would not come into effect until September, making China’s response uncharacteristically quick. Up to now Beijing has waited for the US to “fire the first shot” in the escalating trade war... |
| More here: | More here: |
| Newsflash: US retail sales grew steadily last month, indicating that America’s economy is growing steadily despite tariff worries. | Newsflash: US retail sales grew steadily last month, indicating that America’s economy is growing steadily despite tariff worries. |
| Retail sales jumped by 0.5% in June, the Commerce Department reports. That’s the fifth monthly rise in a row. | Retail sales jumped by 0.5% in June, the Commerce Department reports. That’s the fifth monthly rise in a row. |
| May’s figures have also been revised higher, to show a 1.3% increase - up from 0.8% previously. | May’s figures have also been revised higher, to show a 1.3% increase - up from 0.8% previously. |
| However, ‘core retail sales’ (stripping out cars, gasoline, food and building materials) were flat in June. | However, ‘core retail sales’ (stripping out cars, gasoline, food and building materials) were flat in June. |
| Here’s some instant reaction: | Here’s some instant reaction: |
| Consumer chugging along: Retail sales up a solid 0.5% m/m in June (in-line with exp.) with upward revisions in prior months https://t.co/AwtoXCMkUF pic.twitter.com/rNWc4Doark | Consumer chugging along: Retail sales up a solid 0.5% m/m in June (in-line with exp.) with upward revisions in prior months https://t.co/AwtoXCMkUF pic.twitter.com/rNWc4Doark |
| US retail sales a mixed bag in June. Headline was +0.5% after +1.3% in May. However, core sales (ex food, gasoline, building materials and autos) were flat in June, after +0.8% in May. Q2 growth was up on Q1: +7.9% annualised vs 1.8% for headline and +6.5% vs 2.1% for core. pic.twitter.com/yPFTqhFEP4 | US retail sales a mixed bag in June. Headline was +0.5% after +1.3% in May. However, core sales (ex food, gasoline, building materials and autos) were flat in June, after +0.8% in May. Q2 growth was up on Q1: +7.9% annualised vs 1.8% for headline and +6.5% vs 2.1% for core. pic.twitter.com/yPFTqhFEP4 |