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China accuses US of 'trade bullyism' as tariffs kick in – business live China accuses US of 'trade bullyism' as tariffs kick in – business live
(35 minutes later)
Meanwhile, Canada’s Barrick Gold has agreed to buy FTSE 100-listed Randgold Resources in a $18.3bn deal to create the world’s largest gold company.
Shares in Randgold are up 6% on the news to £52.15, making it the second-biggest riser on the FTSE 100 after broadcaster Sky. The new company will be listed in New York and Toronto and will be run by Randgold boss Mark Bristow, while Barrick chairman John Thornton will chair the merged business.
He said:
Randgold has the agility and swift-footedness of a younger and smaller company, much like Barrick in its early years, While Barrick has the infrastructure and global reach of a large corporate company.
However, some analysts were sceptical. Kieron Hodgson at Panmure said:
Our opinion is that the proposed merger, instead of being based on merit, strength and strategic integration, is more akin to the proverbial ‘two drunks supporting each other at closing time’.
The all-share deal values Randgold at £4.58bn or £48.5 a share, according to Thomson Reuters data.
Paul Mumford at Cavendish Asset Management says the 2% plus rise in oil prices is good news for smaller UK oil and gas companies.
Should Brent crude continue to trade in a range between $70/barrel and $80/barrel the outcome looks good for smaller UK oil and gas companies. It will prove a boon for cash flows and forecasts as every extra dollar at that point goes straight through to cash flow. As well as taking the pressure off highly-geared companies, this would boost the value of reserves making it easier to obtain finance for exploration and development.
However, even if Brent crude falls below this ideal and into the $60/barrel, many of these smaller companies will still remain quite profitable. The situation in the sector is very different to what it was during the last oil spike; companies have worked hard to get operational costs way down, and many have taken advantage of the sustained high price to lock-in a price for the immediate future. Whereas these companies were previously trading on razor margins and vulnerable to small falls, they are now far more resilient and can comfortably stomach falls all the way down to $60/barrel.
Should Brent crude go south of $60/barrel, then we start to enter trouble and worry territory (although many will still remain profitable down to $50barrel). Conversely, should the price continue to rise above $80/barrel could be counterproductive in that it could cause an overcorrection, triggering volatility. All in all, however, so long as we are able to keep the price above $70/barrel, the outlook is very rosy.
The trade tensions between the US and China are weighing on European stock markets. The Chinese, south Korean and Japanese markets are all closed for public holidays today, so Hong Kong’s Hang Seng index and the Australian stock market were the biggest losers in Asia. These are the latest moves in Europe:The trade tensions between the US and China are weighing on European stock markets. The Chinese, south Korean and Japanese markets are all closed for public holidays today, so Hong Kong’s Hang Seng index and the Australian stock market were the biggest losers in Asia. These are the latest moves in Europe:
UK’s FTSE 100 index down 0.2%UK’s FTSE 100 index down 0.2%
Germany’s Dax down 0.4%Germany’s Dax down 0.4%
France’s CAC down 0.2%France’s CAC down 0.2%
Italy’s FTSE MiB down 0.6%Italy’s FTSE MiB down 0.6%
Spain’s Ibex down 0.4%Spain’s Ibex down 0.4%
Oil prices have hit a four-year high after Opec declined to boost production at the weekend, despite Donald Trump’s call for action. Brent crude, the global benchmark, hit their highest level since November 2014 this morning, rising more than $2, or 2.7%, to $80.94 a barrel. It is still up 2.4% at $80.70 a barrel.Oil prices have hit a four-year high after Opec declined to boost production at the weekend, despite Donald Trump’s call for action. Brent crude, the global benchmark, hit their highest level since November 2014 this morning, rising more than $2, or 2.7%, to $80.94 a barrel. It is still up 2.4% at $80.70 a barrel.
This has prompted some to forecast a spike to $90 or even $100 around the turn of the year.This has prompted some to forecast a spike to $90 or even $100 around the turn of the year.
"The likelihood of an oil spike and crash scenario akin to the one observed in 2008 has increased."--BAML as oil hits $80"The likelihood of an oil spike and crash scenario akin to the one observed in 2008 has increased."--BAML as oil hits $80
Oliver Rakau, chief German economist at Oxford Economics, has taken a closer look at the German Ifo business confidence numbers. He noted that while the index dipped slightly in September, it remained well above its recent lows, although it is still some way off last year’s highs.Oliver Rakau, chief German economist at Oxford Economics, has taken a closer look at the German Ifo business confidence numbers. He noted that while the index dipped slightly in September, it remained well above its recent lows, although it is still some way off last year’s highs.
It is especially encouraging that firms’ expectations only edged down to 101.0 from 101.2 after surging in August as we had worried that it might have been a one off. But it looks like the 6-month outlook has indeed brightened somewhat. At the same time, the assessment of the current situation was stable at 106.4, somewhat above the Q2 average meaning that the economy may have picked up a little as we head into Q4.It is especially encouraging that firms’ expectations only edged down to 101.0 from 101.2 after surging in August as we had worried that it might have been a one off. But it looks like the 6-month outlook has indeed brightened somewhat. At the same time, the assessment of the current situation was stable at 106.4, somewhat above the Q2 average meaning that the economy may have picked up a little as we head into Q4.
The sector breakdown shows the diverging fortunes of the external and domestic economy. The manufacturing ifo fell moderately but stayed above its recent lows. That may be connected to Trump ratcheting up his trade skirmish with China and supports our view that slowing global trade will be a headwind in H2, but manufacturer’s expectations rising may indicate that the headwind from last year’s euro appreciation may begin to fade.The sector breakdown shows the diverging fortunes of the external and domestic economy. The manufacturing ifo fell moderately but stayed above its recent lows. That may be connected to Trump ratcheting up his trade skirmish with China and supports our view that slowing global trade will be a headwind in H2, but manufacturer’s expectations rising may indicate that the headwind from last year’s euro appreciation may begin to fade.
Moreover, services and construction sentiment rose further, which is a sign of rising wages finding their way into increased consumer spending. Moreover, builders continue to benefit from an ultra-tight supply-side, that may curtail their growth pace, but it will pro-long their long-running boom.Moreover, services and construction sentiment rose further, which is a sign of rising wages finding their way into increased consumer spending. Moreover, builders continue to benefit from an ultra-tight supply-side, that may curtail their growth pace, but it will pro-long their long-running boom.
Overall, it really shouldn’t surprise anyone that the German manufacturing ifo falls on the day that new US tariffs on China take effect. However, a robust domestic economy is reflected in increased services confidence. That continues to support our (and the ECB’s) optimism regarding the resilience of domestic demand. So, even if growth won’t be as buoyant as 2017, it should remain strong enough to keep the ECB on track to normalise its monetary policy.Overall, it really shouldn’t surprise anyone that the German manufacturing ifo falls on the day that new US tariffs on China take effect. However, a robust domestic economy is reflected in increased services confidence. That continues to support our (and the ECB’s) optimism regarding the resilience of domestic demand. So, even if growth won’t be as buoyant as 2017, it should remain strong enough to keep the ECB on track to normalise its monetary policy.
Sterling is still trading above $1.31, lifted by comments from Brexit minister Dominic Raab. Brushing off the prime minister’s humiliating experience at last week’s EU summit in Salzburg, he told Talk Radio:Sterling is still trading above $1.31, lifted by comments from Brexit minister Dominic Raab. Brushing off the prime minister’s humiliating experience at last week’s EU summit in Salzburg, he told Talk Radio:
We keep on negotiating in good faith, we try and get the best deal we can, but we are ready for all eventualities. We’ll keep negotiating in good faith. I’m confident we’ll get there.We keep on negotiating in good faith, we try and get the best deal we can, but we are ready for all eventualities. We’ll keep negotiating in good faith. I’m confident we’ll get there.
Theresa May’s Chequers deal was rejected by EU leaders in Salzburg, but Raab said:Theresa May’s Chequers deal was rejected by EU leaders in Salzburg, but Raab said:
These blips in the road, they’re blown a little bit out of proportion, but we double down, we don’t throw our toys out of the pram, hold our nerve, keep our cool.These blips in the road, they’re blown a little bit out of proportion, but we double down, we don’t throw our toys out of the pram, hold our nerve, keep our cool.
But at the same time, we need to be ready for the possibility... that the ambitions that we are bringing to these negotiations to try and get a win-win deal isn’t matched by the other side and it does take two to tango.But at the same time, we need to be ready for the possibility... that the ambitions that we are bringing to these negotiations to try and get a win-win deal isn’t matched by the other side and it does take two to tango.
The German Ifo survey was better than expected. The closely watched business climate index dipped to 103.7 in September from a revised 103.9 in August – but better than the 103.2 expected by economists.The German Ifo survey was better than expected. The closely watched business climate index dipped to 103.7 in September from a revised 103.9 in August – but better than the 103.2 expected by economists.
It suggests that German businesses are not overly worried about the deepening trade conflict between the US and China. The latest tariffs kicked in today.It suggests that German businesses are not overly worried about the deepening trade conflict between the US and China. The latest tariffs kicked in today.
As #Germany’s Ifo index, drops only slightly to 103.7, is it time to send a “thank you note” to Brussels asks @carstenbrzeski https://t.co/oZ5VY0mCHHAs #Germany’s Ifo index, drops only slightly to 103.7, is it time to send a “thank you note” to Brussels asks @carstenbrzeski https://t.co/oZ5VY0mCHH
Oil prices are up 2% as the market tightens. Brent crude has gained $1.6 to $80.42 a barrel. Earlier, it hit $80.47 a barrel, its highest level since May. US light crude is 1.75% higher at $72.02 a barrel.Oil prices are up 2% as the market tightens. Brent crude has gained $1.6 to $80.42 a barrel. Earlier, it hit $80.47 a barrel, its highest level since May. US light crude is 1.75% higher at $72.02 a barrel.
Looming US sanctions will restrict Iran’s oil exports, leading to less global supply. Despite this, the Opec oil cartel kept oil output limits in place a meeting in Algiers on Sunday – defying Donald Trump’s call for action. He tweeted last week that Opec “must get prices down now!” Some traders are forecasting that crude could spike to $100 a barrel next year.Looming US sanctions will restrict Iran’s oil exports, leading to less global supply. Despite this, the Opec oil cartel kept oil output limits in place a meeting in Algiers on Sunday – defying Donald Trump’s call for action. He tweeted last week that Opec “must get prices down now!” Some traders are forecasting that crude could spike to $100 a barrel next year.
US commercial oil inventories are at their lowest level since early 2015, although US oiil production is near a record high of 11m barrels a day.US commercial oil inventories are at their lowest level since early 2015, although US oiil production is near a record high of 11m barrels a day.
Commodity traders Trafigura and Mercuria reckon Brent crude could rise to $90 a barrel by Christmas and break through $100 early next year, with US sanctions against Iran due to be fully implemented in November.Commodity traders Trafigura and Mercuria reckon Brent crude could rise to $90 a barrel by Christmas and break through $100 early next year, with US sanctions against Iran due to be fully implemented in November.
JPMorgan said in its latest market outlook that a “spike to $90 per barrel is likely” in light of the sanctions.JPMorgan said in its latest market outlook that a “spike to $90 per barrel is likely” in light of the sanctions.
The FTSE 100 index has opened lower, trading down 0.26% (nearly 20 points) at 7470.16.The FTSE 100 index has opened lower, trading down 0.26% (nearly 20 points) at 7470.16.
Shares in broadcaster Sky have jumped 9% to £17.22. US cable-TV giant Comcast won the auction for Europe’s biggest pay-TV group at the weekend, outbidding Rupert Murdoch’s Twenty-First Century Fox with a £17.28 a share offer.Shares in broadcaster Sky have jumped 9% to £17.22. US cable-TV giant Comcast won the auction for Europe’s biggest pay-TV group at the weekend, outbidding Rupert Murdoch’s Twenty-First Century Fox with a £17.28 a share offer.
Our media editor Jim Waterson writes:Our media editor Jim Waterson writes:
Rupert Murdoch’s dream of taking full control of Sky dissolved on Saturday night as he was outbid by the US firm Comcast. But anyone celebrating a setback for the mogul should be warned. The most divisive figure in Britain’s media may still have the last laugh.Rupert Murdoch’s dream of taking full control of Sky dissolved on Saturday night as he was outbid by the US firm Comcast. But anyone celebrating a setback for the mogul should be warned. The most divisive figure in Britain’s media may still have the last laugh.
However, for now the pound is up, trading above $1.31 (up nearly 0.3%) after Brexit minister Dominic Raab expressed confidence that the government will get to a Brexit deal in the end, although he also said it was ready and prepared to deal with the risks of a no-deal outcome.However, for now the pound is up, trading above $1.31 (up nearly 0.3%) after Brexit minister Dominic Raab expressed confidence that the government will get to a Brexit deal in the end, although he also said it was ready and prepared to deal with the risks of a no-deal outcome.
Hussein Sayed, chief market strategist at online broker FXTM, has sent us his thoughts on trade and sterling:Hussein Sayed, chief market strategist at online broker FXTM, has sent us his thoughts on trade and sterling:
Politics and trade tensions are expected to be the key market drivers this week. While [the tariffs] seem to be already priced in, investors are becoming increasingly worried that the trade war may enter phase III. With Beijing cancelling planned trade talks on Saturday and the US State Department imposing sanctions against China’s defence agency, relations between the two largest economies in the world may further deteriorate.Politics and trade tensions are expected to be the key market drivers this week. While [the tariffs] seem to be already priced in, investors are becoming increasingly worried that the trade war may enter phase III. With Beijing cancelling planned trade talks on Saturday and the US State Department imposing sanctions against China’s defence agency, relations between the two largest economies in the world may further deteriorate.
While markets in mainland China, Japan, and South Korea are shut for a public holiday, investor skepticism was reflected in Hong Kong stocks and commodity currencies which fell in early Monday trade. Whether the pain will begin reflecting in Wall Street depends on what happens next. If President Trump follows through on his promises to impose further tariffs on the remaining $267 billion of Chinese imports, investors may consider it as a signal to move out of US equities.While markets in mainland China, Japan, and South Korea are shut for a public holiday, investor skepticism was reflected in Hong Kong stocks and commodity currencies which fell in early Monday trade. Whether the pain will begin reflecting in Wall Street depends on what happens next. If President Trump follows through on his promises to impose further tariffs on the remaining $267 billion of Chinese imports, investors may consider it as a signal to move out of US equities.
Sterling has recovered a bit this morning, trading up 0.2% at $1.3106 against the dollar.Sterling has recovered a bit this morning, trading up 0.2% at $1.3106 against the dollar.
Sayed says:Sayed says:
Markets thought that we might finally be seeing a Brexit breakthrough at the Salzburg Summit on Friday. Instead, the summit increased the chance of a no-deal Brexit as EU leaders slammed Theresa May’s Chequers Brexit proposal with the Irish border remaining a key barrier to a deal. With no tier one economic data on the calendar, expect GBPUSD to weaken further this week with a possible test below $1.3.Markets thought that we might finally be seeing a Brexit breakthrough at the Salzburg Summit on Friday. Instead, the summit increased the chance of a no-deal Brexit as EU leaders slammed Theresa May’s Chequers Brexit proposal with the Irish border remaining a key barrier to a deal. With no tier one economic data on the calendar, expect GBPUSD to weaken further this week with a possible test below $1.3.
It feels quite autumnal this morning, but Thomas Cook is still suffering the effects of the heatwave across northern Europe. The travel giant has issued a profit warning, cutting its 2018 profit outlook by 13%. It has blamed the heatwave for more discounting and tougher competition.It feels quite autumnal this morning, but Thomas Cook is still suffering the effects of the heatwave across northern Europe. The travel giant has issued a profit warning, cutting its 2018 profit outlook by 13%. It has blamed the heatwave for more discounting and tougher competition.
The company’s shares crashed 18% when the stock market opened.The company’s shares crashed 18% when the stock market opened.
The long run of hot weather (Britain’s joint-longest heatwave on record) encouraged more people in Britain, Germany and Scandinavia to stay at home or holiday in their own country, rather than head to warmer countries in southern Europe. The warm weather is also affecting bookings for winter holidays.The long run of hot weather (Britain’s joint-longest heatwave on record) encouraged more people in Britain, Germany and Scandinavia to stay at home or holiday in their own country, rather than head to warmer countries in southern Europe. The warm weather is also affecting bookings for winter holidays.
Thomas Cook said:Thomas Cook said:
The slowdown in customer bookings during June and July extended into August, leading to higher than normal levels of promotional activity.The slowdown in customer bookings during June and July extended into August, leading to higher than normal levels of promotional activity.
The tour operator now expects underlying operating profits to come in at £280m rather than the previously estimated £323m to £355m in the 12 months to 30 September. Rival Tui has stuck to its forecasts.The tour operator now expects underlying operating profits to come in at £280m rather than the previously estimated £323m to £355m in the 12 months to 30 September. Rival Tui has stuck to its forecasts.
While the Labour party is meeting in Liverpool, Theresa May faces a tense meeting in Downing Street today, amid intense pressure from leading Brexiters in her party to change course and seek a simpler, less ambitious deal. Key elements of the prime minister’s Chequers deal were rejected by EU leaders at last week’s humiliating summit in Salzburg.While the Labour party is meeting in Liverpool, Theresa May faces a tense meeting in Downing Street today, amid intense pressure from leading Brexiters in her party to change course and seek a simpler, less ambitious deal. Key elements of the prime minister’s Chequers deal were rejected by EU leaders at last week’s humiliating summit in Salzburg.
Big Brexit day in westminster - May has to face Cabinet after Salzburg mess and IEA right wing think tank putting forward another plan (quite a lot of it is familiar stuff)Big Brexit day in westminster - May has to face Cabinet after Salzburg mess and IEA right wing think tank putting forward another plan (quite a lot of it is familiar stuff)
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 new tariffs imposed by the US and China on each other’s goods went into effect on Monday, as the bitter trade dispute deepened. Soon after, Beijing accused Washington of engaging in “trade bullyism,” the official Xinhua news agency reported.The new tariffs imposed by the US and China on each other’s goods went into effect on Monday, as the bitter trade dispute deepened. Soon after, Beijing accused Washington of engaging in “trade bullyism,” the official Xinhua news agency reported.
But Beijing also said it was willing to restart trade negotiations with Washington if the talks are “based on mutual respect and equality”.But Beijing also said it was willing to restart trade negotiations with Washington if the talks are “based on mutual respect and equality”.
The US tariffs on $200bn of Chinese goods and China’s retaliatory tariffs on $60bn of US imports took effect at midday in Asia (5am BST), although the level was not as high as feared earlier. The US opted for 10% tariffs (initially - they go up to 25% by the end of the year) while China’s duties vary between 5% and 10%. The trade dispute started in the early summer when trade talks broke down and the world’s two biggest economies slapped duties on $50bn of each other’s goods in July.The US tariffs on $200bn of Chinese goods and China’s retaliatory tariffs on $60bn of US imports took effect at midday in Asia (5am BST), although the level was not as high as feared earlier. The US opted for 10% tariffs (initially - they go up to 25% by the end of the year) while China’s duties vary between 5% and 10%. The trade dispute started in the early summer when trade talks broke down and the world’s two biggest economies slapped duties on $50bn of each other’s goods in July.
Economists have been warning about the impact on growth not just in the US and China, but the wider global economy.Economists have been warning about the impact on growth not just in the US and China, but the wider global economy.
The US tariffs spare some gadgets such as smartwatches and speakers, while home modems, routers and internet gateways are included.The US tariffs spare some gadgets such as smartwatches and speakers, while home modems, routers and internet gateways are included.
Reuters reports:Reuters reports:
The move will effectively create a two-tiered tariff structure for consumer internet, with many products, such as Fitbit fitness trackers, Apple’s watch and Amazon.com’s Echo smart speaker being favored over routers and internet gateways from Arris International, Netgear, D-Link and others.The move will effectively create a two-tiered tariff structure for consumer internet, with many products, such as Fitbit fitness trackers, Apple’s watch and Amazon.com’s Echo smart speaker being favored over routers and internet gateways from Arris International, Netgear, D-Link and others.
“We’re operating under the assumption that the tens of millions of devices that deliver high-speed internet into consumers’ homes will be impacted by these tariffs,” said Jim Brennan, Arris’ senior vice president of supply chain, quality and operations.“We’re operating under the assumption that the tens of millions of devices that deliver high-speed internet into consumers’ homes will be impacted by these tariffs,” said Jim Brennan, Arris’ senior vice president of supply chain, quality and operations.
“It feels anti-consumer because our devices are what enables the core of consumer tech,” Brennan told Reuters.“It feels anti-consumer because our devices are what enables the core of consumer tech,” Brennan told Reuters.
The pound also remains in focus, with the party conference season in full swing. Michael Hewson, chief market analyst at CMC Markets UK, says:The pound also remains in focus, with the party conference season in full swing. Michael Hewson, chief market analyst at CMC Markets UK, says:
The pound had a dreadful week last week despite hitting a two-month high against the US dollar. The breakdown in relations between the UK and EU leaders in Salzburg last week, and Prime Minister Theresa May’s punchy statement on Friday could well be described as the usual political theatre that we’ve all become accustomed to in the past couple of years, however markets appear to be deciding that with the March 2019 deadline looming, the room for political manoeuvre appears to be getting smaller.The pound had a dreadful week last week despite hitting a two-month high against the US dollar. The breakdown in relations between the UK and EU leaders in Salzburg last week, and Prime Minister Theresa May’s punchy statement on Friday could well be described as the usual political theatre that we’ve all become accustomed to in the past couple of years, however markets appear to be deciding that with the March 2019 deadline looming, the room for political manoeuvre appears to be getting smaller.
This has led to the not unreasonable conclusion that the risks of a political, as well economic dislocation have increased, particularly since both the UK government, and so-called opposition parties appear to be more concerned about their own internal squabbles, than actually doing what is best for the people they claim to represent.This has led to the not unreasonable conclusion that the risks of a political, as well economic dislocation have increased, particularly since both the UK government, and so-called opposition parties appear to be more concerned about their own internal squabbles, than actually doing what is best for the people they claim to represent.
With party conference season now in full swing there is likely to be little of consequence that is likely to be construed as positive for sterling, as both Labour this week, and the Conservative’s next week look to shore up their base support, with equally economically incoherent policies.With party conference season now in full swing there is likely to be little of consequence that is likely to be construed as positive for sterling, as both Labour this week, and the Conservative’s next week look to shore up their base support, with equally economically incoherent policies.
Pound under a bit of pressure this morning but GBPUSD still holding for now above Friday's low around 1.3050, set after the plunge: pic.twitter.com/SoSIkb3Ta1Pound under a bit of pressure this morning but GBPUSD still holding for now above Friday's low around 1.3050, set after the plunge: pic.twitter.com/SoSIkb3Ta1
The AgendaThe Agenda
9am BST German Ifo business climate survey9am BST German Ifo business climate survey
11am BST CBI Industrial Trends survey11am BST CBI Industrial Trends survey