This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/live/2018/nov/21/markets-rattled-us-china-trade-brexit-pound-dow-ftse-business-live
The article has changed 20 times. There is an RSS feed of changes available.
| Version 3 | Version 4 |
|---|---|
| UK deficit rises; US slams China over 'unfair' trade practices – business live | UK deficit rises; US slams China over 'unfair' trade practices – business live |
| (35 minutes later) | |
| The jump in UK borrowing last month may show that the government is, as promised, easing the chains of austerity (a little), as the economy slows. | |
| John Hawksworth, chief economist at PwC, explains: | |
| Public borrowing in October 2018 was £1.6 billion higher than in October 2017, reflecting rapid growth in government spending last month but only a modest rise in tax receipts. | |
| This is consistent with indications from business surveys and the latest retail sales data that the economy slowed markedly as we moved into the autumn, due in large part to increased uncertainty around Brexit. | |
| The rise in UK borrowing last month will worry chancellor Philip Hammond, says Andrew Wishart of Capital Economics. | The rise in UK borrowing last month will worry chancellor Philip Hammond, says Andrew Wishart of Capital Economics. |
| He writes: | He writes: |
| The first public finances figures released since the Budget bucked the recent trend of improvement. Government borrowing of £8.8bn last month (consensus £6.2bn, CE £7.0bn) was up from £7.2bn in the same month last year and marked the largest October deficit for three years. The increase in borrowing compared to last year was due to a £2.2bn rise in “other” (most likely departmental) spending. This leaves borrowing in the fiscal year to date down by 30% compared to last year. While this is still the lowest since 2005, it is above the OBR’s October Budget forecast for a 36% reduction over the year as a whole. | The first public finances figures released since the Budget bucked the recent trend of improvement. Government borrowing of £8.8bn last month (consensus £6.2bn, CE £7.0bn) was up from £7.2bn in the same month last year and marked the largest October deficit for three years. The increase in borrowing compared to last year was due to a £2.2bn rise in “other” (most likely departmental) spending. This leaves borrowing in the fiscal year to date down by 30% compared to last year. While this is still the lowest since 2005, it is above the OBR’s October Budget forecast for a 36% reduction over the year as a whole. |
| This could be a worrying sign for the Chancellor. If this trend continues, the giveaways in the October Budget could see him breach his near-term fiscal targets. And if there is a no deal Brexit, the resulting economic slowdown would probably cause the public finances to deteriorate further. Admittedly, this could be offset to some extent by the UK not paying part of the financial settlement. | This could be a worrying sign for the Chancellor. If this trend continues, the giveaways in the October Budget could see him breach his near-term fiscal targets. And if there is a no deal Brexit, the resulting economic slowdown would probably cause the public finances to deteriorate further. Admittedly, this could be offset to some extent by the UK not paying part of the financial settlement. |
| Ross Campbell, ICAEW Public Sector Director, points out that Britain’s public finances depend on a good Brexit deal: | Ross Campbell, ICAEW Public Sector Director, points out that Britain’s public finances depend on a good Brexit deal: |
| “In the most recent Budget, the Chancellor pledged further investments into the NHS, roads and schools, and again loosened his target for deficit reduction. It looks like Hammond and May have bet on a positive outcome from Brexit, assuming a deal would be struck and pass parliament. The expectation that a Brexit ‘bounce’ would deliver a spike in business and investment following an agreed deal gave the Chancellor the room to put off the hard decision on putting up taxes. With no clear support in Parliament for the deal, this is a high risk strategy. | “In the most recent Budget, the Chancellor pledged further investments into the NHS, roads and schools, and again loosened his target for deficit reduction. It looks like Hammond and May have bet on a positive outcome from Brexit, assuming a deal would be struck and pass parliament. The expectation that a Brexit ‘bounce’ would deliver a spike in business and investment following an agreed deal gave the Chancellor the room to put off the hard decision on putting up taxes. With no clear support in Parliament for the deal, this is a high risk strategy. |
| “We need to remember that if the Government is not able to get its deal with the EU through parliament then all such bets are off. In his budget speech, the Chancellor admitted as much. If the deal doesn’t get through then even if negotiations continue, it is more than likely that the budget will need to be revisited.” | “We need to remember that if the Government is not able to get its deal with the EU through parliament then all such bets are off. In his budget speech, the Chancellor admitted as much. If the deal doesn’t get through then even if negotiations continue, it is more than likely that the budget will need to be revisited.” |
| Economist Philip Shaw of Investec says the big picture is that UK public finance are improving, despite October’s stumble. | Economist Philip Shaw of Investec says the big picture is that UK public finance are improving, despite October’s stumble. |
| UK govt deficit of £8.8bn in Oct disappointing, but almost offset by a £1.9bn favourable revision over Q3. As chart shows, the story of 2018/19 so far is one of a material improvement in the public finances. pic.twitter.com/hnxLZoIxQQ | UK govt deficit of £8.8bn in Oct disappointing, but almost offset by a £1.9bn favourable revision over Q3. As chart shows, the story of 2018/19 so far is one of a material improvement in the public finances. pic.twitter.com/hnxLZoIxQQ |
| The surprise jump in UK borrowing last month erodes some of the year-on-year improvement in the public finances: | The surprise jump in UK borrowing last month erodes some of the year-on-year improvement in the public finances: |
| However, the government is still on track to borrow less in 2018-19 than in 2017-28. | However, the government is still on track to borrow less in 2018-19 than in 2017-28. |
| Britain’s deficit swelled to £8.8bn last month because the government’s income didn’t keep pace with spending. | Britain’s deficit swelled to £8.8bn last month because the government’s income didn’t keep pace with spending. |
| The Office for National Statistics explains: | The Office for National Statistics explains: |
| Central government receipts in October 2018 increased by 1.2% compared with October 2017, to £59.9 billion; while total expenditure increased by 7.7% to £65.4 billion. | Central government receipts in October 2018 increased by 1.2% compared with October 2017, to £59.9 billion; while total expenditure increased by 7.7% to £65.4 billion. |
| Much of this annual growth in central government receipts in October 2018 came from Value Added Tax (VAT), Income Tax and tobacco duties; while interest and dividend receipts (largely dividend transfers from the Bank of England Asset Purchase Facility Fund) (BEAPFF) have fallen on October 2017. | Much of this annual growth in central government receipts in October 2018 came from Value Added Tax (VAT), Income Tax and tobacco duties; while interest and dividend receipts (largely dividend transfers from the Bank of England Asset Purchase Facility Fund) (BEAPFF) have fallen on October 2017. |
| Newsflash: Britain’s ran up a much larger budget deficit than expected last month. | Newsflash: Britain’s ran up a much larger budget deficit than expected last month. |
| The UK borrowed £8.8bn last month, £1.6bn more than in October 2017. | The UK borrowed £8.8bn last month, £1.6bn more than in October 2017. |
| This is the highest October borrowing for three years. | This is the highest October borrowing for three years. |
| On a happier note, Britain has borrowed £26.7bn in the current financial year-to-date, £11.2 billion less than in the same period in 2017. This is the lowest annual deficit at this stage of the year since 2005. | On a happier note, Britain has borrowed £26.7bn in the current financial year-to-date, £11.2 billion less than in the same period in 2017. This is the lowest annual deficit at this stage of the year since 2005. |
| Summary of the UK public finances is that whilst we borrowed more in October in the financial year so far we have borrowed some £11,2 billion less " the lowest year-to-date for 13 years (since 2005)." | Summary of the UK public finances is that whilst we borrowed more in October in the financial year so far we have borrowed some £11,2 billion less " the lowest year-to-date for 13 years (since 2005)." |
| More to follow... | More to follow... |
| European stock markets are clawing their way back from yesterday’s selloff. | European stock markets are clawing their way back from yesterday’s selloff. |
| The main indices are all higher, partly due to hopes of detente between Rome and Brussels over the Italian budget. | The main indices are all higher, partly due to hopes of detente between Rome and Brussels over the Italian budget. |
| There’s excitement in the bond markets this morning, following reports that Italy might compromise over its 2019 budget plans. | There’s excitement in the bond markets this morning, following reports that Italy might compromise over its 2019 budget plans. |
| According to the La Stampa newspaper, deputy PM Matteo Salvini could be open to revising its budget, by cutting planned spending on a new basic income scheme, and unwinding a pension reform. | According to the La Stampa newspaper, deputy PM Matteo Salvini could be open to revising its budget, by cutting planned spending on a new basic income scheme, and unwinding a pension reform. |
| If so, that might help ward off a clash with the European Commission, which will give its judgment on the Italian budget later today (possibly 11am GMT). | If so, that might help ward off a clash with the European Commission, which will give its judgment on the Italian budget later today (possibly 11am GMT). |
| However, it’s not clear if Italy is actually prepare to lower its planed deficit from 2.4% of GDP, or accept that its growth forecasts may be too optimistic. | However, it’s not clear if Italy is actually prepare to lower its planed deficit from 2.4% of GDP, or accept that its growth forecasts may be too optimistic. |
| Still, bond traders are hopeful - the yield (or interest rate) on Italian 10-year debt has dropped from 3.6% to 3.51%. That shows they’re seen as a safer option today. | Still, bond traders are hopeful - the yield (or interest rate) on Italian 10-year debt has dropped from 3.6% to 3.51%. That shows they’re seen as a safer option today. |
| Despite Kevin Hassett’s claim that Trump’s tax policies are working, America’s trade deficit with China has actually grown this year. | Despite Kevin Hassett’s claim that Trump’s tax policies are working, America’s trade deficit with China has actually grown this year. |
| The gap hit $375bn in 2017, and is on rack to exceed this level in 2018 thanks to rollicking imports of China-made technology, electrical equipment, machinery and clothes. | The gap hit $375bn in 2017, and is on rack to exceed this level in 2018 thanks to rollicking imports of China-made technology, electrical equipment, machinery and clothes. |
| The U.S. is on track to post the largest trade deficit ever with China in 2018. https://t.co/tod7fUe7p0 | The U.S. is on track to post the largest trade deficit ever with China in 2018. https://t.co/tod7fUe7p0 |
| Analysts at JP Morgan have warned that the US-China trade war will hurt economic growth. | Analysts at JP Morgan have warned that the US-China trade war will hurt economic growth. |
| They told clients: | They told clients: |
| “We forecast that the US imposes an additional 25% tariff on virtually all goods imports from China early next year. This will drag materially on activity in China and could accelerate the decline in global business confidence now underway.” | “We forecast that the US imposes an additional 25% tariff on virtually all goods imports from China early next year. This will drag materially on activity in China and could accelerate the decline in global business confidence now underway.” |
| One of President Trump’s top economic advisers has suggested there could be a case for “evicting China” from the World Trade Organisation (WTO). | One of President Trump’s top economic advisers has suggested there could be a case for “evicting China” from the World Trade Organisation (WTO). |
| Kevin Hassett, chairman of the president’s Council of Economic Advisers, told the BBC that China had “misbehaved” as a member of the WTO, claiming: | Kevin Hassett, chairman of the president’s Council of Economic Advisers, told the BBC that China had “misbehaved” as a member of the WTO, claiming: |
| We never really envisioned that a country would enter the WTO and then behave the way that China has. It’s a new thing for the WTO to have a member that is misbehaving so much. | We never really envisioned that a country would enter the WTO and then behave the way that China has. It’s a new thing for the WTO to have a member that is misbehaving so much. |
| He also claimed that the WTO was failing the US, as it takes so long to rule on trade disputes: | He also claimed that the WTO was failing the US, as it takes so long to rule on trade disputes: |
| “it takes five or six years and then the damage is done”. | “it takes five or six years and then the damage is done”. |
| Hassett also claimed that Donald Trump’s hardball strategy on international trade is working. That’s questionable, when the US Trade Representative has ruled that China hasn’t change its policies.... | Hassett also claimed that Donald Trump’s hardball strategy on international trade is working. That’s questionable, when the US Trade Representative has ruled that China hasn’t change its policies.... |
| Hopes of a ceasefire in the US-China trade wars are fading today, after America launched a fresh salvo of criticism at Beijing. | Hopes of a ceasefire in the US-China trade wars are fading today, after America launched a fresh salvo of criticism at Beijing. |
| In a new report, US Trade Representative (USTR) Robert Lighthizer rules that China has not changed its “unfair” and “unreasonable” practices, despite pressure from America and the imposition of tariffs on $250bn of Chinese sales to the US. | In a new report, US Trade Representative (USTR) Robert Lighthizer rules that China has not changed its “unfair” and “unreasonable” practices, despite pressure from America and the imposition of tariffs on $250bn of Chinese sales to the US. |
| The move raises tensions ahead of the G20 meeting of world leaders later this month, where presidents Trump and Xi are expected to discuss the issue. | The move raises tensions ahead of the G20 meeting of world leaders later this month, where presidents Trump and Xi are expected to discuss the issue. |
| Lighthizer’s comments came in an update of the U.S. Trade Representative’s “Section 301” investigation into China’s intellectual property and technology transfer policies. | Lighthizer’s comments came in an update of the U.S. Trade Representative’s “Section 301” investigation into China’s intellectual property and technology transfer policies. |
| The USTR declared that China had not responded “constructively” to the initial section 301 reports. | The USTR declared that China had not responded “constructively” to the initial section 301 reports. |
| In particular, it’s unhappy that the Chinese government has persisted in using foreign investment restrictions to push US companies to share technology and intellectual property with Chinese entities. | In particular, it’s unhappy that the Chinese government has persisted in using foreign investment restrictions to push US companies to share technology and intellectual property with Chinese entities. |
| Lighthizer says: | Lighthizer says: |
| “We completed this update as part of this Administration’s strengthened monitoring and enforcement effort. | “We completed this update as part of this Administration’s strengthened monitoring and enforcement effort. |
| This update shows that China has not fundamentally altered its unfair, unreasonable, and market-distorting practices that were the subject of the March 2018 report on our Section 301 investigation.” | This update shows that China has not fundamentally altered its unfair, unreasonable, and market-distorting practices that were the subject of the March 2018 report on our Section 301 investigation.” |
| 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. |
| Global markets are extremely edgy today, as investors fret about global growth prospects, the US-China trade war, Brexit, and Italy’s row with the EU over its budget plans. | Global markets are extremely edgy today, as investors fret about global growth prospects, the US-China trade war, Brexit, and Italy’s row with the EU over its budget plans. |
| Last night, Wall Street suffered one of its shakiest days of the year. The Dow Jones industrial average slumped by 551 points, or 2.2%, to 24,465 points, wiping out its gains for 2018. | Last night, Wall Street suffered one of its shakiest days of the year. The Dow Jones industrial average slumped by 551 points, or 2.2%, to 24,465 points, wiping out its gains for 2018. |
| Technology shares continued their recent losses, with Apple shedding almost 5%. But other sectors also suffered, with retailers Target and Lowe’s both disappointing investors with their latest results. | Technology shares continued their recent losses, with Apple shedding almost 5%. But other sectors also suffered, with retailers Target and Lowe’s both disappointing investors with their latest results. |
| This followed a rough day in Europe, which saw Germany’s DAX hit a new 52-week low. | This followed a rough day in Europe, which saw Germany’s DAX hit a new 52-week low. |
| Economic growth fears also savaged the oil price on Tuesday, sending crude sliding by over 6%. | Economic growth fears also savaged the oil price on Tuesday, sending crude sliding by over 6%. |
| The trading floor chatter is that the long bull market may be fizzling out. | The trading floor chatter is that the long bull market may be fizzling out. |
| Craig Erlam of City firm OANDA says: | Craig Erlam of City firm OANDA says: |
| Another troubling start to the week in financial markets is further denting investor sentiment as we approach the open on Wednesday, with futures currently stable but vulnerable to another tumble. | Another troubling start to the week in financial markets is further denting investor sentiment as we approach the open on Wednesday, with futures currently stable but vulnerable to another tumble. |
| US tech stocks are once again leading the way, plunging on the back of a combination of individual concerns – Apple iPhone sales for example – and general weaker risk appetite. The FAANG stocks extraordinary performance in the first half of the year has put them front and centre once the market turned and some now find themselves in negative territory for 2018, with others not far behind. | US tech stocks are once again leading the way, plunging on the back of a combination of individual concerns – Apple iPhone sales for example – and general weaker risk appetite. The FAANG stocks extraordinary performance in the first half of the year has put them front and centre once the market turned and some now find themselves in negative territory for 2018, with others not far behind. |
| While many would argue a correction has been on the cards for some time due to the growing list of risks to the outlook, be that rising US interest rates, Trump’s aggressive trade agenda, Brexit, Italy or one of a number of other headwinds, how bad it will get is difficult to say. We’re already near the October lows and in correction territory, even close to bear market in some cases such as the DAX, if this is just a corrective move, I would expect investors to start eyeing up some bargains soon. | While many would argue a correction has been on the cards for some time due to the growing list of risks to the outlook, be that rising US interest rates, Trump’s aggressive trade agenda, Brexit, Italy or one of a number of other headwinds, how bad it will get is difficult to say. We’re already near the October lows and in correction territory, even close to bear market in some cases such as the DAX, if this is just a corrective move, I would expect investors to start eyeing up some bargains soon. |
| Also coming up today | Also coming up today |
| There’s lots in the economic calendar, particularly from America as they clear the decks before Thanksgiving. New home sales and durable goods orders will give a picture of the strength of the US economy. | There’s lots in the economic calendar, particularly from America as they clear the decks before Thanksgiving. New home sales and durable goods orders will give a picture of the strength of the US economy. |
| City traders will scrutinise the latest UK public finance figures to see if the government’s fiscal plans are on track. However, that will be overshadowed by Theresa May’s trip to Brussels to discuss the Brexit deal with Jean-Claude Juncker. | City traders will scrutinise the latest UK public finance figures to see if the government’s fiscal plans are on track. However, that will be overshadowed by Theresa May’s trip to Brussels to discuss the Brexit deal with Jean-Claude Juncker. |
| In the eurozone, the Commission is expected to confirm that Italy’s 2019 budget isn’t acceptable. | In the eurozone, the Commission is expected to confirm that Italy’s 2019 budget isn’t acceptable. |
| That paves the way for the EC to launch an excessive deficit procedure which could lead to Italy being fined (although it’s a long process). | That paves the way for the EC to launch an excessive deficit procedure which could lead to Italy being fined (although it’s a long process). |
| The agenda: | The agenda: |
| 9.30am GMT: UK public finances for October | 9.30am GMT: UK public finances for October |
| 10am GMT: OECD releases its latest economic outlook | 10am GMT: OECD releases its latest economic outlook |
| 1.30pm GMT: US durable goods orders and weekly jobless figures | 1.30pm GMT: US durable goods orders and weekly jobless figures |
| 3pm GMT: US home sales, Michigan sentiment survey | 3pm GMT: US home sales, Michigan sentiment survey |
| 3.30pm GMT: US oil inventory figures | 3.30pm GMT: US oil inventory figures |