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You can find the current article at its original source at https://www.theguardian.com/business/live/2018/sep/05/trade-war-fears-markets-china-economy-uk-services-pmi-business-live
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| US trade deficit hits five-month high, as emerging markets slide – business live | US trade deficit hits five-month high, as emerging markets slide – business live |
| (35 minutes later) | |
| Newsflash from Ottawa: The Bank of Canada has left Canadian interest rates on hold, at 1.5%. | |
| The BoC also warns that trade uncertainty is hurting Canada’s economy: | |
| Elevated trade tensions remain a key risk to the global outlook and are pulling some commodity prices lower. Meanwhile, financial stresses have intensified in certain emerging market economies, but with limited spillovers to other countries. | |
| Boom! The pound has just jumped on the foreign exchange markets, on report of a Brexit breakthrough. | |
| But investors should stay cautious - there’s nothing official at this stage. | |
| Bloomberg is reporting that Germany is ready to accept a less-detailed agreement on future ties between the UK and the European Union, to get a deal done. | |
| The UK, for its part, would accept a more vague statement of intent on the future relationship, according to anonymous sources quoted by the newswire. | |
| If true, this would suggest the two sides are amenable to unblocking the current deadlock. This could cut the risk that Britain crashes out of the EU next March without a deal. | |
| Traders reacted quickly, sending the pound back to $1.296 - its highest level this week. | |
| Pound rallies as Germany, U.K. said to drop key Brexit demand, easing path to deal https://t.co/nyjmpLiPpZ pic.twitter.com/HeXUafQMak | |
| Neil Wilson of Markets.com says there are two reasons to treat the news cautiously: | |
| First, Germany does not – despite its clear dominance of the bloc economically - actually speak for the EU position. Michel Barnier may well have something to say about this report. As might Theresa May. | |
| Second, we’ve heard these kinds of rumours lift the pound before and it should be treated with caution. There is a strong chance that this rally could run out of steam and retrace in fairly short order. | |
| But, it nevertheless it does still point to a degree of softening in the general tone of talks and that a deal is more likely than not. | |
| Both the widening American trade gap, and the slide in emerging markets today, can be partly blamed on the stronger US dollar. | Both the widening American trade gap, and the slide in emerging markets today, can be partly blamed on the stronger US dollar. |
| That’s due to the robust US economy, and the prospect of higher interest rates to curb inflation -- as Donald Trump’s tax cuts give the economy a sugar rush. | That’s due to the robust US economy, and the prospect of higher interest rates to curb inflation -- as Donald Trump’s tax cuts give the economy a sugar rush. |
| Quite... | Quite... |
| Trumps trade war causing some issues. Emerging markets are collapsing and our trade deficit is going high. Not lower. The economists are really going to have to parse out how this all works out. | Trumps trade war causing some issues. Emerging markets are collapsing and our trade deficit is going high. Not lower. The economists are really going to have to parse out how this all works out. |
| Mexican politician Jorge Guajardo believes Donald Trump’s attacks on America’s trading partners are partly to blame for the widening US trade gap: | Mexican politician Jorge Guajardo believes Donald Trump’s attacks on America’s trading partners are partly to blame for the widening US trade gap: |
| With his Twitter tirades against Canada, Trump contributes to weaken the peso, making Mexican imports into US more competitive and widening the trade deficit. The understanding of a sixth grader... https://t.co/5PWKclfTXc | With his Twitter tirades against Canada, Trump contributes to weaken the peso, making Mexican imports into US more competitive and widening the trade deficit. The understanding of a sixth grader... https://t.co/5PWKclfTXc |
| White House insiders might want to hide today’s trade data from the president... | White House insiders might want to hide today’s trade data from the president... |
| Not only has the US trade deficit widened, but the gap with Canada has hit a 10-year high. This surplus widened to 5.3bn Canadian dollars in July, from C$4.1 billion the previous month, | Not only has the US trade deficit widened, but the gap with Canada has hit a 10-year high. This surplus widened to 5.3bn Canadian dollars in July, from C$4.1 billion the previous month, |
| This may make Trump even more determined to reach a new North American trade deal, as NAFTA talks restart in Washington. | This may make Trump even more determined to reach a new North American trade deal, as NAFTA talks restart in Washington. |
| Bloomberg says: | Bloomberg says: |
| The figures released Wednesday in Ottawa are likely to play into the resumption of bilateral talks in Washington over the North American Free Trade Agreement. Trump has signed a new deal with Mexico and has threatened to leave Canada out and impose stiff auto tariffs if Prime Minister Justin Trudeau’s government doesn’t make concessions. | The figures released Wednesday in Ottawa are likely to play into the resumption of bilateral talks in Washington over the North American Free Trade Agreement. Trump has signed a new deal with Mexico and has threatened to leave Canada out and impose stiff auto tariffs if Prime Minister Justin Trudeau’s government doesn’t make concessions. |
| Even the metal products targeted by U.S. tariffs showed some resilience in the latest figures. Canadian shipments of steel climbed 16 percent in July after a 36 percent drop in June, while a 2 percent fall in aluminum still left those exports 8.1 percent higher than they were a year prior. | Even the metal products targeted by U.S. tariffs showed some resilience in the latest figures. Canadian shipments of steel climbed 16 percent in July after a 36 percent drop in June, while a 2 percent fall in aluminum still left those exports 8.1 percent higher than they were a year prior. |
| Canada's trade surplus with the U.S. just grew to its widest since 2008, @quinngreg reports https://t.co/Q06rL17ssQ #cdnecon | Canada's trade surplus with the U.S. just grew to its widest since 2008, @quinngreg reports https://t.co/Q06rL17ssQ #cdnecon |
| Newsflash: America’s trade deficit has widened to a five-month high, in a blow to Donald Trump’s attempts to cut it. | Newsflash: America’s trade deficit has widened to a five-month high, in a blow to Donald Trump’s attempts to cut it. |
| US imports jumped by $2.2bn to $261bn in July, according to the latest trade data from the Census Bureau. | US imports jumped by $2.2bn to $261bn in July, according to the latest trade data from the Census Bureau. |
| Exports shrank by $2.1bn, though, to around $211bn, due to lower sales of aircraft and soybeans (which now face tariffs when sold to China). | Exports shrank by $2.1bn, though, to around $211bn, due to lower sales of aircraft and soybeans (which now face tariffs when sold to China). |
| This drove America’s overall trade deficit up to over $50bn. | This drove America’s overall trade deficit up to over $50bn. |
| The White House won’t be pleased to see that America’s goods trade deficit with China surged 10% to a record $36.8 billion. | The White House won’t be pleased to see that America’s goods trade deficit with China surged 10% to a record $36.8 billion. |
| So what’s happening? | So what’s happening? |
| The Wall Street Journal’s theory is that tax cuts and higher federal spending “goosed up” domestic demand, while a cooling economy overseas hampered exports. | The Wall Street Journal’s theory is that tax cuts and higher federal spending “goosed up” domestic demand, while a cooling economy overseas hampered exports. |
| U.S. Trade Deficits by Country, Since 1994: {@TheTerminal Chart Link: https://t.co/90STAZcx4T } pic.twitter.com/4QlPs4OEp5 | U.S. Trade Deficits by Country, Since 1994: {@TheTerminal Chart Link: https://t.co/90STAZcx4T } pic.twitter.com/4QlPs4OEp5 |
| Mihir Kapadia, CEO of Sun Global Investments, blames trade war anxiety and the strengthening US dollar for today’s selloff: | Mihir Kapadia, CEO of Sun Global Investments, blames trade war anxiety and the strengthening US dollar for today’s selloff: |
| “Global stock markets continue to be volatile as the trade dispute between the United States and China continues to escalate. Slowing Chinese growth has unsettled investors as the impact of the ongoing trade dispute continues to impact the Chinese economy. | “Global stock markets continue to be volatile as the trade dispute between the United States and China continues to escalate. Slowing Chinese growth has unsettled investors as the impact of the ongoing trade dispute continues to impact the Chinese economy. |
| Asian stocks are currently lower with all major markets recording losses. The Shanghai Composite index, Japan’s Nikkei and South Korea’s KOSPI all made losses in light on going spat between the two largest economies. The Indonesian Index is down 3.7% as downward pressure on EMs continues. European markets have also opened lower, due to the same concerns. | Asian stocks are currently lower with all major markets recording losses. The Shanghai Composite index, Japan’s Nikkei and South Korea’s KOSPI all made losses in light on going spat between the two largest economies. The Indonesian Index is down 3.7% as downward pressure on EMs continues. European markets have also opened lower, due to the same concerns. |
| Emerging markets are also continuing to suffer as the likes of Turkish inflation are causing concern amongst investors. Most EM currencies are under pressure with today concerns being focused on Indonesia, Argentina and South Africa. As a result of these risky economies and markets, the dollar has become a safe haven for many, allowing it to surge to its latest high” It feels as if the dollar and Amazon stock price is the only asset going up! | Emerging markets are also continuing to suffer as the likes of Turkish inflation are causing concern amongst investors. Most EM currencies are under pressure with today concerns being focused on Indonesia, Argentina and South Africa. As a result of these risky economies and markets, the dollar has become a safe haven for many, allowing it to surge to its latest high” It feels as if the dollar and Amazon stock price is the only asset going up! |
| Here’s Dean Popplewell of City firm OANDA on the losses across emerging markets today: | Here’s Dean Popplewell of City firm OANDA on the losses across emerging markets today: |
| Soured sentiment has left several Asian stock markets with their biggest declines in a fortnight, at least since the bout of EM worries that were fuelled by the TRY’s plunge. | Soured sentiment has left several Asian stock markets with their biggest declines in a fortnight, at least since the bout of EM worries that were fuelled by the TRY’s plunge. |
| In Japan, equities held up better than most, perhaps helped by the overnight yen softness (¥111.47). Nevertheless, investors remain worried that Sino-U.S tariff war could escalate weighed on sentiment. The Nikkei share average dropped -0.51% for a fourth consecutive session while the broader Topix fell -0.77%. | In Japan, equities held up better than most, perhaps helped by the overnight yen softness (¥111.47). Nevertheless, investors remain worried that Sino-U.S tariff war could escalate weighed on sentiment. The Nikkei share average dropped -0.51% for a fourth consecutive session while the broader Topix fell -0.77%. |
| Down-under, Aussie shares extended their losses for a fifth consecutive session overnight, closing down -1%, brushing aside a robust economic growth report (Q2 GDP +0.9% vs. +0.7%) as materials stocks slid on weaker commodity prices. In S. Korea, the Kospi plunged -1.03% as trade war fears intensify. | Down-under, Aussie shares extended their losses for a fifth consecutive session overnight, closing down -1%, brushing aside a robust economic growth report (Q2 GDP +0.9% vs. +0.7%) as materials stocks slid on weaker commodity prices. In S. Korea, the Kospi plunged -1.03% as trade war fears intensify. |
| In Hong Kong, stocks posted their biggest loss in 11-weeks on growth and trade war fears. Overnight, investors’ dumped property, energy and tech stocks amid worries about China’s economy and the Sino-U.S trade war. The Hang Seng index fell -2.6%, while the China Enterprises Index lost -2.3%. | In Hong Kong, stocks posted their biggest loss in 11-weeks on growth and trade war fears. Overnight, investors’ dumped property, energy and tech stocks amid worries about China’s economy and the Sino-U.S trade war. The Hang Seng index fell -2.6%, while the China Enterprises Index lost -2.3%. |
| Emerging market currencies are also having a bad day, with most falling against the US dollar today: | Emerging market currencies are also having a bad day, with most falling against the US dollar today: |
| Asia in the afternoon. Really bad now.- Indonesia down the most in 21 months- Hong Kong off the most since June- USD bid - EM FX at lowest level in 16 months- Virtually only the Dong is pointing up pic.twitter.com/0hpsOaxoDK | Asia in the afternoon. Really bad now.- Indonesia down the most in 21 months- Hong Kong off the most since June- USD bid - EM FX at lowest level in 16 months- Virtually only the Dong is pointing up pic.twitter.com/0hpsOaxoDK |
| Back in the financial world, the rout in emerging markets is gathering pace. | Back in the financial world, the rout in emerging markets is gathering pace. |
| Emerging stock markets across the globe are in the red, as a nasty cocktail of threats hit equities. | Emerging stock markets across the globe are in the red, as a nasty cocktail of threats hit equities. |
| The selloff in Asia overnight has now spread to the Middle East. Saudi Arabia’s stock market is the worst performer, plunging more than 4% at the last count. | The selloff in Asia overnight has now spread to the Middle East. Saudi Arabia’s stock market is the worst performer, plunging more than 4% at the last count. |
| Indonesia’s market has slumped by 3.7%, and there are losses from Shanghai and Hong Kong to Mumbai, Cairo and Johannesburg. | Indonesia’s market has slumped by 3.7%, and there are losses from Shanghai and Hong Kong to Mumbai, Cairo and Johannesburg. |
| Shares are being hit by several factors, including: | Shares are being hit by several factors, including: |
| The slowdown in China’s service sector last month | The slowdown in China’s service sector last month |
| The global impact of the US-China trade war, and the prospect that America implements tariffs on an extra $200bn of Chinese imports later this week | The global impact of the US-China trade war, and the prospect that America implements tariffs on an extra $200bn of Chinese imports later this week |
| The strengthening US dollar, which is sucking capital out of emerging markets and pushing up the cost of repaying debts taken out in dollars | The strengthening US dollar, which is sucking capital out of emerging markets and pushing up the cost of repaying debts taken out in dollars |
| There are also isolated individual factors. South Africa fell into recession yesterday, while Argentina is pushing the IMF for a larger bailout to support its economy. | There are also isolated individual factors. South Africa fell into recession yesterday, while Argentina is pushing the IMF for a larger bailout to support its economy. |
| So investors are fretting that the global economy may slow, especially if more emerging markets follow Argentina and Turkey into financial crisis. | So investors are fretting that the global economy may slow, especially if more emerging markets follow Argentina and Turkey into financial crisis. |
| Equity markets starting to look very messy. Asia closes sharply lower as trade conflict threatens to escalate - Shanghai -1.68%, Hang Seng -2.61%, Nikkei -0.51% - DJIA futures look to shed a triple digit drop! - a touch of contagion - FTSE down 25 points at 7432 at 11.13am | Equity markets starting to look very messy. Asia closes sharply lower as trade conflict threatens to escalate - Shanghai -1.68%, Hang Seng -2.61%, Nikkei -0.51% - DJIA futures look to shed a triple digit drop! - a touch of contagion - FTSE down 25 points at 7432 at 11.13am |
| As Christoph Barraud, an economist at Paris-based brokerage Market Securities, put it: | As Christoph Barraud, an economist at Paris-based brokerage Market Securities, put it: |
| “Until last month people were focusing on U.S. company earnings but now they are looking closely at what’s happening in emerging markets, at the trade war and the fact that the United States is likely to implement another wave of tariffs against China. | “Until last month people were focusing on U.S. company earnings but now they are looking closely at what’s happening in emerging markets, at the trade war and the fact that the United States is likely to implement another wave of tariffs against China. |
| If you look at global growth, more and more signs are that it will slow in coming months.” | If you look at global growth, more and more signs are that it will slow in coming months.” |
| Cambridge, Oxford, Warrington, Reading and Swindon are all feeling the brunt of the worker shortage, apparently. | Cambridge, Oxford, Warrington, Reading and Swindon are all feeling the brunt of the worker shortage, apparently. |
| Jobs site Adzuna says each of these cities have more than 15 vacancies for every jobseeker, putting labour in a strong position (theoretically, anyway). | Jobs site Adzuna says each of these cities have more than 15 vacancies for every jobseeker, putting labour in a strong position (theoretically, anyway). |
| Despite the hiring struggle, the UK economy is on track to grow by 0.4% in the current quarter, Markit estimates. | Despite the hiring struggle, the UK economy is on track to grow by 0.4% in the current quarter, Markit estimates. |
| That would match the UK’s growth rate in April-June, and beat some City forecasts. | That would match the UK’s growth rate in April-June, and beat some City forecasts. |
| But still, it would be fairly modest growth compared to the years before the EU referendum.... | But still, it would be fairly modest growth compared to the years before the EU referendum.... |
| Morgan Stanley say they “continue to anticipate weakness in the economy going forward, as we enter the final stretch of Brexit negotiations.” | Morgan Stanley say they “continue to anticipate weakness in the economy going forward, as we enter the final stretch of Brexit negotiations.” |