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| UK records biggest July budget surplus since 2000 - business live | |
| (35 minutes later) | |
| UK Public Finances: Borrowing (PSNB ex) in current financial year-to-date was £12.8 billion: £8.5 billion less than in the same period in 2017; lowest year-to-date for 16 years (2002) https://t.co/I314qlS342 pic.twitter.com/Cg3y6ZERiA | |
| UK Public Finances: Borrowing (PSNB ex) in July 2018 was £2.0 billion in surplus; a £1.0 billion larger surplus than in July 2017; largest July surplus for 18 years (2000) https://t.co/wVw9WsAVfn pic.twitter.com/3NRYCBmh3d | |
| The UK public finances have come in better than expected in July, the government has announced. | |
| The budget surplus last month came in at £2bn, the best July figure since 2000 and nearly double the £1.1bn figure expected by economists. The improvement was driven by large tax receipts and takes the deficit for the first four months of the financial year to £12.8bn, down 40% on the same time last year. | |
| But could that change? Paul Donovan at UBS says: | |
| Markets have not particularly liked US President Trump’s comments, seeing them as a threat to the independence of the central bank. The Fed’s independence has little legal standing. It is independent by custom more than by statute. There is a shocking lack of economists amongst the voting members of the FOMC at the moment, and a high number of vacancies. | |
| Kit Juckes at Societe Generale says Trump has less influence over his country’s central bank than Erdogan does: | |
| [Trump] would like easier monetary policy, or at least, he would not like to see interest rates marching higher to offset the boost to the economy from his fiscal and trade policies. His liking for low rates is something he has in common with Turkey’s President Erdogan, possibly because at heart, both are in the real estate business. The difference, of course, is that President Erdogan can influence monetary policy, because the [Turkish central bank] is clearly not independent; whereas President Trump can feel let down by Fed under Chair Powell, but he can’t do much about it. | |
| Back with Trump and his comments on the Fed, Michael Hewson, chief market analyst at CMC Markets UK, said: | Back with Trump and his comments on the Fed, Michael Hewson, chief market analyst at CMC Markets UK, said: |
| Two months before he was elected President of the United States in September 2016, Donald Trump said Fed chair Janet Yellen should be “ashamed of herself” for keeping interest rates low and creating a “false stock market” saying that the central bank’s policies were hurting savers and pension plans. | Two months before he was elected President of the United States in September 2016, Donald Trump said Fed chair Janet Yellen should be “ashamed of herself” for keeping interest rates low and creating a “false stock market” saying that the central bank’s policies were hurting savers and pension plans. |
| It therefore seems rather strange that he should now be criticising the current incumbent, and his choice as Fed chair for not keeping rates low, and pushing rates higher. | It therefore seems rather strange that he should now be criticising the current incumbent, and his choice as Fed chair for not keeping rates low, and pushing rates higher. |
| The US President’s comments last month, and which he repeated last night, was that he was “not thrilled” with Jerome Powell and the Federal Reserve, for its consistent policy of raising interest rates, saying he should be given more help by the Fed. | The US President’s comments last month, and which he repeated last night, was that he was “not thrilled” with Jerome Powell and the Federal Reserve, for its consistent policy of raising interest rates, saying he should be given more help by the Fed. |
| Unfortunately for the President that’s not how it works under the Fed’s mandate and while he has pledged to continue to criticise the Fed if it continues to raise rates, his criticism while unwelcome and unusual for a US President, is unlikely to stop the Fed from hiking again next month, or later this year. | Unfortunately for the President that’s not how it works under the Fed’s mandate and while he has pledged to continue to criticise the Fed if it continues to raise rates, his criticism while unwelcome and unusual for a US President, is unlikely to stop the Fed from hiking again next month, or later this year. |
| If anything the President’s comments in driving down the US dollar could well make it easier for the Fed to hike rates, as they could mitigate the upside in the US dollar, as a strong currency tends to have a deflationary effect. | If anything the President’s comments in driving down the US dollar could well make it easier for the Fed to hike rates, as they could mitigate the upside in the US dollar, as a strong currency tends to have a deflationary effect. |
| In any case, even before yesterday’s comments by the President, there was already a debate going on in the markets, as to the wisdom of the Fed going too quickly where rates are concerned. The crisis in emerging markets, concerns about trade, as well as geopolitics, were causing some to question as to whether the Fed should look at revising its guidance. | In any case, even before yesterday’s comments by the President, there was already a debate going on in the markets, as to the wisdom of the Fed going too quickly where rates are concerned. The crisis in emerging markets, concerns about trade, as well as geopolitics, were causing some to question as to whether the Fed should look at revising its guidance. |
| The worry is that the President’s interventions will make it much harder to have that debate, without accusations that the Fed is being manipulated. | The worry is that the President’s interventions will make it much harder to have that debate, without accusations that the Fed is being manipulated. |
| With an economy set to continue to expand at around 4% the Fed does need to be acutely aware of the possibility that the economy may well overheat as a result of the fiscal stimulus that is still helping juice the current economic expansion. | With an economy set to continue to expand at around 4% the Fed does need to be acutely aware of the possibility that the economy may well overheat as a result of the fiscal stimulus that is still helping juice the current economic expansion. |
| Someone should tell President Trump that the central bank in hiking rates is a vote of confidence in the US economy, and thus his stewardship of it, and will also help those savers he claimed to be so worried about in 2016. He may than look at it through a slightly different lens. Of course he could well be also getting his excuses in early in the event we start to see a slowdown over the next few quarters, as he blames the Fed for slowing the economy. | Someone should tell President Trump that the central bank in hiking rates is a vote of confidence in the US economy, and thus his stewardship of it, and will also help those savers he claimed to be so worried about in 2016. He may than look at it through a slightly different lens. Of course he could well be also getting his excuses in early in the event we start to see a slowdown over the next few quarters, as he blames the Fed for slowing the economy. |
| The latest UK grocery market share figures are out: | The latest UK grocery market share figures are out: |
| Kantar Grocery Market Share Update 21/08/2018 pic.twitter.com/71uZLqGjxW | Kantar Grocery Market Share Update 21/08/2018 pic.twitter.com/71uZLqGjxW |
| Apparently the heatwave and Love Island gave a boost to sales. Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: | Apparently the heatwave and Love Island gave a boost to sales. Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: |
| The grocery market experienced strong growth buoyed in particular by the recent heatwave. Over July, thirsty Brits spent an additional £67 million on alcoholic drinks, while non-alcoholic beers were cheered on by the sun with sales up 58% compared to this time last year. Soft drinks also increased – up 28%. Meanwhile, Love Island not only tugged on shoppers’ heartstrings but also their purse strings as men’s skincare products jumped by 16%. | The grocery market experienced strong growth buoyed in particular by the recent heatwave. Over July, thirsty Brits spent an additional £67 million on alcoholic drinks, while non-alcoholic beers were cheered on by the sun with sales up 58% compared to this time last year. Soft drinks also increased – up 28%. Meanwhile, Love Island not only tugged on shoppers’ heartstrings but also their purse strings as men’s skincare products jumped by 16%. |
| As expected, there is a caution tone to early trading in Europe. | As expected, there is a caution tone to early trading in Europe. |
| The FTSE 100 opened down 0.2%, Germany’s Dax has dipped 0.1%, France’s Cac is 0.2% lower and Spain’s Ibex is off 0.1%. | The FTSE 100 opened down 0.2%, Germany’s Dax has dipped 0.1%, France’s Cac is 0.2% lower and Spain’s Ibex is off 0.1%. |
| With the FTSE 100 expected to open lower, Artjom Hatsaturjants at Accendo Markets, said: | With the FTSE 100 expected to open lower, Artjom Hatsaturjants at Accendo Markets, said: |
| Calls for a negative open come in spite of upbeat trading on Wall St and in Asia, where markets were hopeful for an easing in Sino-US trade tensions, and after China’s banking regulator called for local banks to increase infrastructure lending amid a slight pullback of Chinese economy. | Calls for a negative open come in spite of upbeat trading on Wall St and in Asia, where markets were hopeful for an easing in Sino-US trade tensions, and after China’s banking regulator called for local banks to increase infrastructure lending amid a slight pullback of Chinese economy. |
| Most of the FTSE negativity is generated by dollar losses after President Trump criticised the Fed Chair Powell’s interest-rate hiking policy in an interview with Reuters. The Fed is independent in setting monetary policy and markets were spooked by yet another comment from Donald Trump criticising higher interest rates (his property magnate background seeping through?). | Most of the FTSE negativity is generated by dollar losses after President Trump criticised the Fed Chair Powell’s interest-rate hiking policy in an interview with Reuters. The Fed is independent in setting monetary policy and markets were spooked by yet another comment from Donald Trump criticising higher interest rates (his property magnate background seeping through?). |
| Sterling strength this morning is pressuring the FTSE, though there is silver lining to this cloud, as the corresponding greenback weakness is proving beneficial to US dollar-denominated commodities, as oil, copper and gold prices are higher this morning. That said, dual-listed Miners are lower in Australia overnight on the back of BHP Billiton results missing expectations. | Sterling strength this morning is pressuring the FTSE, though there is silver lining to this cloud, as the corresponding greenback weakness is proving beneficial to US dollar-denominated commodities, as oil, copper and gold prices are higher this morning. That said, dual-listed Miners are lower in Australia overnight on the back of BHP Billiton results missing expectations. |
| European markets are expected to edge lower when trading begins shortly: | European markets are expected to edge lower when trading begins shortly: |
| European Opening Calls:#FTSE 7574 -0.22%#DAX 12326 -0.05%#CAC 5377 -0.04%#MIB 20461 -0.05%#IBEX 9462 -0.07% | European Opening Calls:#FTSE 7574 -0.22%#DAX 12326 -0.05%#CAC 5377 -0.04%#MIB 20461 -0.05%#IBEX 9462 -0.07% |
| Turkey is still giving investors pause for thought, and Italy is also an increasing cause for concern. David Madden, market analyst at CMC Markets UK, said; | Turkey is still giving investors pause for thought, and Italy is also an increasing cause for concern. David Madden, market analyst at CMC Markets UK, said; |
| European equities ... are still underperforming their US counterparts. The currency crisis is still hanging over Turkey, as the revelation that S&P and Moody’s downgraded the nation’s debt rating got traders wondering if individual Turkish banks could be in line to be downgraded next. Should that be the case, that could be the catalyst for a move lower in the euro and or eurozone banks. President Trump will keep his tough stance against Turkey, and won’t make any concessions for the release of US pastor Andrew Brunson, and this is likely to keep pressure on Turkey too. | European equities ... are still underperforming their US counterparts. The currency crisis is still hanging over Turkey, as the revelation that S&P and Moody’s downgraded the nation’s debt rating got traders wondering if individual Turkish banks could be in line to be downgraded next. Should that be the case, that could be the catalyst for a move lower in the euro and or eurozone banks. President Trump will keep his tough stance against Turkey, and won’t make any concessions for the release of US pastor Andrew Brunson, and this is likely to keep pressure on Turkey too. |
| Moody’s will carry out their review of Italy’s debt rating by October. In the grand scheme of things, Italy has the potential to be a much bigger problem for the eurozone than Turkey. The European Central Bank can only buy investment grade bonds for their stimulus package, and should Italian debt be classified as ‘junk’, it could spark a sell-off in Italian government debt, and in turn drive up their borrowing costs. | Moody’s will carry out their review of Italy’s debt rating by October. In the grand scheme of things, Italy has the potential to be a much bigger problem for the eurozone than Turkey. The European Central Bank can only buy investment grade bonds for their stimulus package, and should Italian debt be classified as ‘junk’, it could spark a sell-off in Italian government debt, and in turn drive up their borrowing costs. |
| 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. |
| Kicking out a well respected central banker and replacing them with your own appointee should guarantee an easy ride for the newcomer, you would have thought. But these days we live in Trump world and Jerome Powell, the president’s choice to chair the Federal Reserve as a replacement for Janet Yellen, got it in the neck from the White House on Monday. | Kicking out a well respected central banker and replacing them with your own appointee should guarantee an easy ride for the newcomer, you would have thought. But these days we live in Trump world and Jerome Powell, the president’s choice to chair the Federal Reserve as a replacement for Janet Yellen, got it in the neck from the White House on Monday. |
| The Fed has been raising interest rates and is expected to continue doing so, with another two increases expected this year. But President Trump told Reuters on Monday: | The Fed has been raising interest rates and is expected to continue doing so, with another two increases expected this year. But President Trump told Reuters on Monday: |
| I’m not thrilled with his raising of interest rates, no, I’m not thrilled. | I’m not thrilled with his raising of interest rates, no, I’m not thrilled. |
| We’re negotiating very powerfully and strongly with other nations [on trade]. We’re going to win. But during this period of time I should be given some help by the Fed. The other countries are accommodated. | We’re negotiating very powerfully and strongly with other nations [on trade]. We’re going to win. But during this period of time I should be given some help by the Fed. The other countries are accommodated. |
| Not what Powell wants to hear ahead of this week’s key meeting of central bankers in Jackson Hole. And Trump’s intervention puts the Fed in a tricky spot. Jasper Lawler, head of research at London Capital Group, said: | Not what Powell wants to hear ahead of this week’s key meeting of central bankers in Jackson Hole. And Trump’s intervention puts the Fed in a tricky spot. Jasper Lawler, head of research at London Capital Group, said: |
| Trump could be sowing the seed for market perception problems later down the line. For example, should the stronger dollar result in weaker economic data moving towards December and the Fed decides not to hike. The market could question whether the Fed opted not to hike on the basis of data or to appease Trump? So, whilst Trump will not influence the path of rate hikes, his comments could impact on market’s perception of what is happening, which is an equally dangerous game to be playing. | Trump could be sowing the seed for market perception problems later down the line. For example, should the stronger dollar result in weaker economic data moving towards December and the Fed decides not to hike. The market could question whether the Fed opted not to hike on the basis of data or to appease Trump? So, whilst Trump will not influence the path of rate hikes, his comments could impact on market’s perception of what is happening, which is an equally dangerous game to be playing. |
| Trump also used the Reuters interview to take another swipe at China - and for good measure Europe - for supposedly manipulating their currencies. | Trump also used the Reuters interview to take another swipe at China - and for good measure Europe - for supposedly manipulating their currencies. |
| And ahead of this week’s meeting between US and Chinese officials to discuss the current trade dispute, Trump said he did not expect much progress from the talks, which is not what the markets want to hear. | And ahead of this week’s meeting between US and Chinese officials to discuss the current trade dispute, Trump said he did not expect much progress from the talks, which is not what the markets want to hear. |
| Still, if the president wants a weaker US currency, he got his wish. The dollar is slipping back, with the pound currently up 0.37% to $1.2841 and the euro around 0.5% better. | Still, if the president wants a weaker US currency, he got his wish. The dollar is slipping back, with the pound currently up 0.37% to $1.2841 and the euro around 0.5% better. |
| On a relatively quiet day, there could be some good news for UK chancellor Philip Hammond ahead of his autumn budget. | On a relatively quiet day, there could be some good news for UK chancellor Philip Hammond ahead of his autumn budget. |
| The UK is expected to record its biggest July budget surplus for 17 years, moving from a deficit of £5.4bn last month to a surplus of £1.1bn, helped by increased corporation tax payments. | The UK is expected to record its biggest July budget surplus for 17 years, moving from a deficit of £5.4bn last month to a surplus of £1.1bn, helped by increased corporation tax payments. |
| Agenda: | Agenda: |
| 9.30 BST UK public finance figures | 9.30 BST UK public finance figures |
| 11.00 BST CBI industrial trends | 11.00 BST CBI industrial trends |