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| Markets nervous amid new US-China tariffs and Trump's troubles - business live | Markets nervous amid new US-China tariffs and Trump's troubles - business live |
| (35 minutes later) | |
| Eurozone business growth picked up but at a slower pace than expected, with the prospects of a trade war hitting the outlook for manufacturers. | |
| The IHS Markit preliminary composite PMI - which includes both the manufacturing and service sectors - came in at 54.4 in August, up from 54.3 the previous month but marginally below the forecast 54.5. The rate of expansion was one of the weakest seen over the past year and a half, said Markit. | |
| Companies expectations of growth slipped to the lowest for nearly two years. | |
| The services PMI rose from 54.2 to 54.4, in line with expectations. But the manufacturing index fell from 55.1 to 54.6, the lowest since November 2016 and below the expected 55. | |
| Chris Williamson, chief business economist at IHS Markit warned of warning lights flashing. He said: | |
| The survey data indicate that the eurozone economy looks to have continued to grow at a steady rate in August, raising hopes that the third quarter could see GDP growth match the 0.4% expansion seen in the second quarter. In fact, the survey evidence suggests that the official data so far this year could yet be revised slightly higher. | |
| Jobs growth also remains encouragingly robust, which should help further stimulate consumer spending and help offset signs of continuing weakness in exports. | |
| With the indicators of current activity, employment and price gauges remaining elevated, the August survey sends a hawkish signal to policymakers. But the forward-looking indicators suggest the business mood could cool as summer passes. | |
| Warning lights are flashing. Analysis of past data indicates that demand needs to pick up to sustain current output and employment growth in coming months. Yet the risks seem tilted to the downside. | |
| Escalating political worries, rising prices and a recent slowdown in order book growth have all contributed to the gloomiest outlook for almost two years, according to companies’ expectations of their future output. In manufacturing, optimism is down to its lowest for almost three years, as a near- stalling of exports corroborated escalating trade war worries. | |
| With manufacturing looking the most susceptible to a trade-led slowdown in coming months, hopes are pinned on a robust service sector helping to drive economic growth as we move into the autumn, yet even here optimism is down to its lowest for nearly two years. | |
| Back with the German PMIs: | |
| Flash #Germany PMI 55.7 v 55.0 in July (best since Feb). PMI so far indicates Q3 GDP of c.+0.5%. Employment growth close to record highs. Services-led expansion, but new orders growth for goods slipped to the lowest since May 2016 amid smallest rise in exports for over 2 years pic.twitter.com/LRBYJIEeGk | |
| Investors remain cautious, with markets continuing to drift. Lee Wild, head of equity strategy at interactive investor, said: | Investors remain cautious, with markets continuing to drift. Lee Wild, head of equity strategy at interactive investor, said: |
| Markets traded either side of breakeven in early trade as tariffs threatened by both the US and China came into effect overnight. And there’s a real risk to global economic growth if the US slaps duties on another $200 billion of Chinese goods, and especially if other countries get sucked into this dispute. At a time when other economies are beginning to struggle, a sharp slowdown in US expansion could have a significant impact worldwide. | Markets traded either side of breakeven in early trade as tariffs threatened by both the US and China came into effect overnight. And there’s a real risk to global economic growth if the US slaps duties on another $200 billion of Chinese goods, and especially if other countries get sucked into this dispute. At a time when other economies are beginning to struggle, a sharp slowdown in US expansion could have a significant impact worldwide. |
| These developments come at a particularly sensitive time for a UK stock market rangebound for the past three months. September is statistically the worst month of the year for UK shares, but there have been wild swings either way in recent years, so don’t expect this stale period to last. | These developments come at a particularly sensitive time for a UK stock market rangebound for the past three months. September is statistically the worst month of the year for UK shares, but there have been wild swings either way in recent years, so don’t expect this stale period to last. |
| Germany’s business activity hit a six month high, with a strong service sector making up for weakness manufacturing as global trade tensions rise. | Germany’s business activity hit a six month high, with a strong service sector making up for weakness manufacturing as global trade tensions rise. |
| The IHS Markit preliminary composite PMI rose from 55 in July to 55.7, better than the expected 55.2. | The IHS Markit preliminary composite PMI rose from 55 in July to 55.7, better than the expected 55.2. |
| But the manufacturing index fell from 56.9 to a lower than forecast 56.1. The service sector rose from 54.1 to 55.2. Phil Smith, principal economist at IHS Markit said: | But the manufacturing index fell from 56.9 to a lower than forecast 56.1. The service sector rose from 54.1 to 55.2. Phil Smith, principal economist at IHS Markit said: |
| German business continued to display remarkable resilience during August, with the latest PMI data going some way to dispel any fears about a global trade slowdown and its impact on the health of the economy. | German business continued to display remarkable resilience during August, with the latest PMI data going some way to dispel any fears about a global trade slowdown and its impact on the health of the economy. |
| Buoyed by strong fundamentals in the domestic market, including rising employment and wages, the service sector enjoyed an upturn in growth in August and drove the steepest rise in private sector business activity for six months. | Buoyed by strong fundamentals in the domestic market, including rising employment and wages, the service sector enjoyed an upturn in growth in August and drove the steepest rise in private sector business activity for six months. |
| While the manufacturing PMI retreated slightly, it remained well inside growth territory at the mid- point in the third quarter. The top-line number is perhaps flattered by the output component, with trends in new orders and exports – the latter the weakest in over two years – pointing to a softer pace of growth. | While the manufacturing PMI retreated slightly, it remained well inside growth territory at the mid- point in the third quarter. The top-line number is perhaps flattered by the output component, with trends in new orders and exports – the latter the weakest in over two years – pointing to a softer pace of growth. |
| Elsewhere, the survey’s measure of prices charged for goods and services edged closer to January’s survey-record peak, to suggest the potential for some renewed upward pressure on the headline inflation rate in coming months. | Elsewhere, the survey’s measure of prices charged for goods and services edged closer to January’s survey-record peak, to suggest the potential for some renewed upward pressure on the headline inflation rate in coming months. |
| #France Markit Services PMI Flash at 55.7 https://t.co/7vBIs85sQM pic.twitter.com/2V0oQJ9Em1 | #France Markit Services PMI Flash at 55.7 https://t.co/7vBIs85sQM pic.twitter.com/2V0oQJ9Em1 |
| #France Markit Manufacturing PMI Flash at 53.7 https://t.co/IxQ6ZMYHt1 pic.twitter.com/CMClN29pDd | #France Markit Manufacturing PMI Flash at 53.7 https://t.co/IxQ6ZMYHt1 pic.twitter.com/CMClN29pDd |
| France has reported better than expected growth in August, according to a preliminary survey of the country’s manufacturing and service sectors. | France has reported better than expected growth in August, according to a preliminary survey of the country’s manufacturing and service sectors. |
| IHS Markit’s composite purchasing managers index - which combines the two sectors - rose from 54.4 in July to 55.1 this month. Analysts had been expecting a figure of around 54.6. The index has been above the 50 level which separates growth from contraction for the 26th month in a row. | IHS Markit’s composite purchasing managers index - which combines the two sectors - rose from 54.4 in July to 55.1 this month. Analysts had been expecting a figure of around 54.6. The index has been above the 50 level which separates growth from contraction for the 26th month in a row. |
| The manufacturing PMI rose from 53.3 to 53.7 while the service sector index increased from 54.9 to 55.7. Sam Teague, economist at IHS Markit said: | The manufacturing PMI rose from 53.3 to 53.7 while the service sector index increased from 54.9 to 55.7. Sam Teague, economist at IHS Markit said: |
| Output growth across the French private sector ticked up to a four-month high in August, with both the service and manufacturing sectors seeing stronger expansions. Robust domestic client demand, alongside a renewed upturn in exports provided stimulus for the latest acceleration in growth. | Output growth across the French private sector ticked up to a four-month high in August, with both the service and manufacturing sectors seeing stronger expansions. Robust domestic client demand, alongside a renewed upturn in exports provided stimulus for the latest acceleration in growth. |
| A key theme in the latest survey were the sharp inflationary pressures reported in the manufacturing sector, with many respondents blaming higher oil- related input cost burdens. This in turn placed downward pressure on confidence towards expected output growth over the next year. That said, despite optimism slipping in August, French businesses continued to hire additional staff at an elevated pace, partly reflecting rising output requirements. | A key theme in the latest survey were the sharp inflationary pressures reported in the manufacturing sector, with many respondents blaming higher oil- related input cost burdens. This in turn placed downward pressure on confidence towards expected output growth over the next year. That said, despite optimism slipping in August, French businesses continued to hire additional staff at an elevated pace, partly reflecting rising output requirements. |
| The new round of tit-for-tat trade tariffs between the US and China, the prospect of a US rate rise next month and Donald Trump’s growing problems have cast a shadow over European markets at the open. | The new round of tit-for-tat trade tariffs between the US and China, the prospect of a US rate rise next month and Donald Trump’s growing problems have cast a shadow over European markets at the open. |
| The FTSE 100 is virtually flat, up just 0.05%, while Germany’s Dax is down 0.07% and France’s Cac has climbed 0.11%. | The FTSE 100 is virtually flat, up just 0.05%, while Germany’s Dax is down 0.07% and France’s Cac has climbed 0.11%. |
| Here are the opening calls for the European markets: | Here are the opening calls for the European markets: |
| European Opening Calls:#FTSE 7562 -0.16%#DAX 12365 -0.17%#CAC 5418 -0.05%#MIB 20679 -0.10%#IBEX 9566 -0.15% | European Opening Calls:#FTSE 7562 -0.16%#DAX 12365 -0.17%#CAC 5418 -0.05%#MIB 20679 -0.10%#IBEX 9566 -0.15% |
| Weaker tone across European stock indices as fresh round of US-China tariffs kick in. #Trump issues continue to weigh #FTSE called 20 lower | Weaker tone across European stock indices as fresh round of US-China tariffs kick in. #Trump issues continue to weigh #FTSE called 20 lower |
| 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. |
| The bull run in the US market may have broken a new record on Wednesday, but investors have plenty to be nervous about at the moment. | The bull run in the US market may have broken a new record on Wednesday, but investors have plenty to be nervous about at the moment. |
| US and Chinese negotiators are meeting to try and resolve the trade dispute between the two sides, but this has not stopped new tariffs coming into effect a few hours ago. | US and Chinese negotiators are meeting to try and resolve the trade dispute between the two sides, but this has not stopped new tariffs coming into effect a few hours ago. |
| The US imposed a new round of tariffs on $16bn worth of imports from China, including motorcycles, locomotives and agricultural equipment. The 25% tax came into effect at 5.00 BST (noon in Beijing). | The US imposed a new round of tariffs on $16bn worth of imports from China, including motorcycles, locomotives and agricultural equipment. The 25% tax came into effect at 5.00 BST (noon in Beijing). |
| China immediately responded by saying it planned to file a fresh complaint to the World Trade Organisations, and imposing retaliatory taxes on $16bn worth of US goods. David Madden, market analyst at CMC Markets UK, said: | China immediately responded by saying it planned to file a fresh complaint to the World Trade Organisations, and imposing retaliatory taxes on $16bn worth of US goods. David Madden, market analyst at CMC Markets UK, said: |
| The US-China trade spat continues as representatives from both countries engage in low level talks in the US. The tit-for-tat tariffs conflict continues as both sides will impose tariffs on $16 billion worth of each other’s goods today. The monetary size is small but the gesture is big, and traders will be eyeing developments. | The US-China trade spat continues as representatives from both countries engage in low level talks in the US. The tit-for-tat tariffs conflict continues as both sides will impose tariffs on $16 billion worth of each other’s goods today. The monetary size is small but the gesture is big, and traders will be eyeing developments. |
| The trade dispute is of course not the only thing to worry US markets. President Trump’s troubles continued after the criminal conviction of two associates, which is causing the one thing markets hate above all - uncertainty. Jasper Lawler, head of research at London Capital Group, said: | The trade dispute is of course not the only thing to worry US markets. President Trump’s troubles continued after the criminal conviction of two associates, which is causing the one thing markets hate above all - uncertainty. Jasper Lawler, head of research at London Capital Group, said: |
| There has been a lot of negative news on Trump over the past 36 hours; the job of markets will now be to decide whether Trump can ride the storm, or whether the double blow is likely to damage the Republican Party’s election prospects at the mid terms in November and result in the extension of a criminal investigation, which is already overshadowing Trump’s Presidency. The reality is that the market’s reaction so far has been limited and contained, suggesting that traders believe, at least for now, that Trump can move past this. | There has been a lot of negative news on Trump over the past 36 hours; the job of markets will now be to decide whether Trump can ride the storm, or whether the double blow is likely to damage the Republican Party’s election prospects at the mid terms in November and result in the extension of a criminal investigation, which is already overshadowing Trump’s Presidency. The reality is that the market’s reaction so far has been limited and contained, suggesting that traders believe, at least for now, that Trump can move past this. |
| The latest minutes from the Federal Reserve suggested the central bank is still keen on hiking rates, with another rise expected in September despite Trump’s recent attack on the policy. But the Fed did express some concerns about the Chinese trade spat, meaning it was marginally less hawkish than some had expected. | The latest minutes from the Federal Reserve suggested the central bank is still keen on hiking rates, with another rise expected in September despite Trump’s recent attack on the policy. But the Fed did express some concerns about the Chinese trade spat, meaning it was marginally less hawkish than some had expected. |
| Later today come the minutes from the recent meeting of the European Central Bank, with investors looking for further clues about the ending of its bond buying programme and the prospect of any rate rises. | Later today come the minutes from the recent meeting of the European Central Bank, with investors looking for further clues about the ending of its bond buying programme and the prospect of any rate rises. |
| Also today there are the preliminary snapshots of the eurozone economy in August, with updates from France, Germany and the bloc as a whole.CMC’s Madden said: | Also today there are the preliminary snapshots of the eurozone economy in August, with updates from France, Germany and the bloc as a whole.CMC’s Madden said: |
| The flash manufacturing and services PMI reports from major eurozone countries will be in focus today. At 8.15am (UK time) France will release their numbers, and economists are expecting the manufacturing report to come in at 53.4, a slight improvement on July’s 53.3. The consensus estimate for the services report is 55.1, up from 54.9 last month. Germany will announce their figures at 8.30am (UK time) and traders are expecting a slight cooling in the manufacturing sector from 56.9 in July to 56.5. Economists are expecting the services report to be 54.3, and the July reading was 54.1. | The flash manufacturing and services PMI reports from major eurozone countries will be in focus today. At 8.15am (UK time) France will release their numbers, and economists are expecting the manufacturing report to come in at 53.4, a slight improvement on July’s 53.3. The consensus estimate for the services report is 55.1, up from 54.9 last month. Germany will announce their figures at 8.30am (UK time) and traders are expecting a slight cooling in the manufacturing sector from 56.9 in July to 56.5. Economists are expecting the services report to be 54.3, and the July reading was 54.1. |
| As for the overall eurozone performance, economists at UniCredit said: | As for the overall eurozone performance, economists at UniCredit said: |
| The composite PMI is likely to edge up slightly in August, to 54.5 from 54.3 in the previous month (10:00 CET). We expect both the manufacturing and the services components to contribute to the headline reading. While a pickup in global trade activity during the second half of 2018, as indicated by our own global leading indicator, is likely to bolster sentiment of eurozone export-dependent manufacturers going forward, solid domestic fundamentals stemming from robust consumer spending and record-low unemployment should keep economic activity in the services sector well supported. | The composite PMI is likely to edge up slightly in August, to 54.5 from 54.3 in the previous month (10:00 CET). We expect both the manufacturing and the services components to contribute to the headline reading. While a pickup in global trade activity during the second half of 2018, as indicated by our own global leading indicator, is likely to bolster sentiment of eurozone export-dependent manufacturers going forward, solid domestic fundamentals stemming from robust consumer spending and record-low unemployment should keep economic activity in the services sector well supported. |
| Agenda: | Agenda: |
| 8.15 BST French manufacturing and services PMI | 8.15 BST French manufacturing and services PMI |
| 8.30 BST German manufacturing and services PMI | 8.30 BST German manufacturing and services PMI |
| 9.00 BST Eurozone manufacturing and services PMI | 9.00 BST Eurozone manufacturing and services PMI |
| 11.00 BST CBI distributive trends survey for August | 11.00 BST CBI distributive trends survey for August |
| 12.30 BST Minutes of the July meeting of the European Central Bank | 12.30 BST Minutes of the July meeting of the European Central Bank |