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| Eurozone growth forecasts slashed; trade war hits markets - business live | |
| (32 minutes later) | |
| Newsflash: The European Commission has cut its growth forecast for the eurozone, and warned that trade disputes have hurt economic growth. | |
| The EC now expects eurozone GDP to only rise by 1.2% in 2019, down from 1.3% previously. For 2020, it expects growth of 1.5%, down from 1.6%. | |
| In its new economic forecasts, the EC singles out trade tensions: | |
| Economic activity in the EU slowed further in the second half of 2018 as growth in the global economy and trade weakened amid tightened global financing conditions, unresolved trade tensions, high uncertainty, and as a result of exceptional weakness in the manufacturing sector that extended into the start of 2019. | |
| The slowdown was even more pronounced in the euro area as the region is not only highly dependent on external demand, but has also been hit by a number of sector- and country-specific factors, mainly in its largest economy, that have weighed on sentiment as well as on trade between euro area partners. These include disruptions in the car manufacturing sector, social tensions, policy uncertainty, as well as uncertainty related to Brexit. | |
| The EC also hopes that the global slowdown will “bottom out” this year. However, that assumption is based on the US and China NOT imposing more tariffs (clearly this report was written before Donald Trump’s latest Twitter storm). | |
| The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore! | |
| Trade war anxiety has dragged India’s main stock index, the Sensex, down 0.8% today to a five-week low. | |
| It’s not been a great morning in Europe’s stock markets, with most continental bourses adding to Monday’s losses. | It’s not been a great morning in Europe’s stock markets, with most continental bourses adding to Monday’s losses. |
| US commodity prices are dropping in early trading in Chicago. | US commodity prices are dropping in early trading in Chicago. |
| Futures contracts in soybeans, corn and wheat are all under pressure, as traders gloomily conclude that China and the US may not lift tariffs on each other’s exports soon. | Futures contracts in soybeans, corn and wheat are all under pressure, as traders gloomily conclude that China and the US may not lift tariffs on each other’s exports soon. |
| It’s been a horrible mess in grains. #wheat #corn #soybeans pic.twitter.com/aAnDnQVlkV | It’s been a horrible mess in grains. #wheat #corn #soybeans pic.twitter.com/aAnDnQVlkV |
| European stock markets are also being dragged down by some weak industrial data from Germany. | European stock markets are also being dragged down by some weak industrial data from Germany. |
| Germany factory orders only rose by 0.6% in March, weaker than the 1.5% increase which economists expected. | Germany factory orders only rose by 0.6% in March, weaker than the 1.5% increase which economists expected. |
| On an annual basis, orders were 6% lower than a year ago - highlighting how German manufacturing has struggled in the last year. | On an annual basis, orders were 6% lower than a year ago - highlighting how German manufacturing has struggled in the last year. |
| Although foreign orders rose by 4.2% (led by the eurozone), this was wiped out by a 4.2% decline in domestic demand. | Although foreign orders rose by 4.2% (led by the eurozone), this was wiped out by a 4.2% decline in domestic demand. |
| One bright spot in this otherwise weak-ish German new orders report: demand from euro area countries jumped by 8.6% in March. pic.twitter.com/hQC9vGIZig | One bright spot in this otherwise weak-ish German new orders report: demand from euro area countries jumped by 8.6% in March. pic.twitter.com/hQC9vGIZig |
| Today’s losses have dragged the FTSE 100 down to a one-month low: | Today’s losses have dragged the FTSE 100 down to a one-month low: |
| Neil MacKinnon, global macro strategist at VTB Capital, says investors fear the trad war negotiations could collapse: | Neil MacKinnon, global macro strategist at VTB Capital, says investors fear the trad war negotiations could collapse: |
| “President Trump’s threat to increase tariffs on Chinese imports is denting market sentiment and creating unnecessary volatility especially in equity markets. | “President Trump’s threat to increase tariffs on Chinese imports is denting market sentiment and creating unnecessary volatility especially in equity markets. |
| Investors had been hopeful of a constructive outcome to the US-China trade talks but a worst-case scenario of a collapse in the talks could totally undermine hopes of a recovery in world trade and global economic growth” | Investors had been hopeful of a constructive outcome to the US-China trade talks but a worst-case scenario of a collapse in the talks could totally undermine hopes of a recovery in world trade and global economic growth” |
| The selloff is gathering pace, as anxiety over the US-China trade dispute bubbles away. | The selloff is gathering pace, as anxiety over the US-China trade dispute bubbles away. |
| Britain’s FTSE 100 is now down 70 points, or nearly 1%, at 7,320, as London traders play catch-up after yesterday’s holiday. This could be its worst day in over a month. | Britain’s FTSE 100 is now down 70 points, or nearly 1%, at 7,320, as London traders play catch-up after yesterday’s holiday. This could be its worst day in over a month. |
| Industrial group Melrose (-3.6%) is now the biggest faller, with fellow exporter Burberry (-2.75%) and packaging firm Mondi (-3.1%) joining Asia-focused banks among the top fallers. | Industrial group Melrose (-3.6%) is now the biggest faller, with fellow exporter Burberry (-2.75%) and packaging firm Mondi (-3.1%) joining Asia-focused banks among the top fallers. |
| The FSE 250, which contains smaller UK-focused companies, has shed 0.8% | The FSE 250, which contains smaller UK-focused companies, has shed 0.8% |
| The French CAC and German DAX are now both down around 0.5%, adding to Monday’s losses. | The French CAC and German DAX are now both down around 0.5%, adding to Monday’s losses. |
| The news that China’s top negotiator Liu He is still heading to Washington later this week hasn’t provided much cheer to invesors. | The news that China’s top negotiator Liu He is still heading to Washington later this week hasn’t provided much cheer to invesors. |
| Fiona Cincotta, analyst at City Index, says the looming thread of fresh tariffs is worrying the City. | Fiona Cincotta, analyst at City Index, says the looming thread of fresh tariffs is worrying the City. |
| After the last set of US-China trade negotiations in Beijing, comments from both sides were muted about progress but on Monday the US threatened to increase trade tariffs of Chinese again because the Chinese side seems to be backtracking on some of the agreements made during the talks. The increase from 10% to 20% would affect $200 billion worth of goods and could kick in as soon as this Friday unless the Chinese delegation arriving in Washington on Thursday manages to appease the US negotiators. | After the last set of US-China trade negotiations in Beijing, comments from both sides were muted about progress but on Monday the US threatened to increase trade tariffs of Chinese again because the Chinese side seems to be backtracking on some of the agreements made during the talks. The increase from 10% to 20% would affect $200 billion worth of goods and could kick in as soon as this Friday unless the Chinese delegation arriving in Washington on Thursday manages to appease the US negotiators. |
| The US-China one-step-forward-two-step-back hurt US markets late Monday and extended into Asian and European trading. The DAX initially held up helped by data showing that German manufacturing orders picked up in March but it eventually crumbled because German exporters are highly sensitive to the stability of the Chinese market, one of their top export destinations. | The US-China one-step-forward-two-step-back hurt US markets late Monday and extended into Asian and European trading. The DAX initially held up helped by data showing that German manufacturing orders picked up in March but it eventually crumbled because German exporters are highly sensitive to the stability of the Chinese market, one of their top export destinations. |
| Back in the UK, car sales have fallen again as private buyers shun the market. | Back in the UK, car sales have fallen again as private buyers shun the market. |
| The SMMT, which represents care manufacturers and salespeople, reports that new registrations shrunk by 4.1% in April to 161,064 cars -- the second worst reading for any April since 2012. | The SMMT, which represents care manufacturers and salespeople, reports that new registrations shrunk by 4.1% in April to 161,064 cars -- the second worst reading for any April since 2012. |
| Registrations by private motorists fell by 10.3%, a steep decline suggesting consumers are being cautious (or cash-strapped). Fleet sales ( to companies) rose by 2.9%. | Registrations by private motorists fell by 10.3%, a steep decline suggesting consumers are being cautious (or cash-strapped). Fleet sales ( to companies) rose by 2.9%. |
| The UK new car market declined by -4.1% in April. The month saw 161,064 units registered, the second lowest April volume since 2012 but following a double-digit increase the previous year. https://t.co/k9j9L5Iiid pic.twitter.com/TCvxorosFx | The UK new car market declined by -4.1% in April. The month saw 161,064 units registered, the second lowest April volume since 2012 but following a double-digit increase the previous year. https://t.co/k9j9L5Iiid pic.twitter.com/TCvxorosFx |
| Christine Lagarde also warned that Donald Trump’s threat to hike Chinese tariffs are an ‘unfavourable’ development, just when the trade war appeared to be cooling. | Christine Lagarde also warned that Donald Trump’s threat to hike Chinese tariffs are an ‘unfavourable’ development, just when the trade war appeared to be cooling. |
| The IMF chief says: | The IMF chief says: |
| We thought this threat was waning and relations were improving and we were moving toward an agreement. | We thought this threat was waning and relations were improving and we were moving toward an agreement. |
| We hope that is still the case but today rumors, tweets and comments are not very favourable.” | We hope that is still the case but today rumors, tweets and comments are not very favourable.” |
| The head of the International Monetary Fund has just weighed in, urging Beijing and Washington to cool their trade war. | The head of the International Monetary Fund has just weighed in, urging Beijing and Washington to cool their trade war. |
| Speaking at a finance conference in Paris, Christine Lagarde told reporters that the world economy would suffer from further escalation. | Speaking at a finance conference in Paris, Christine Lagarde told reporters that the world economy would suffer from further escalation. |
| She warned: | She warned: |
| “For us at the IMF, it’s imperative that trade tensions are resolved in a way satisfying for everyone because clearly tensions between the United States and China are the threat to the global economy,”. | “For us at the IMF, it’s imperative that trade tensions are resolved in a way satisfying for everyone because clearly tensions between the United States and China are the threat to the global economy,”. |
| Lagarde also gave a speech on sustainable development, in which she challenged private lenders to focus more on long-term value, and less on short-term profits (good luck with that!) | Lagarde also gave a speech on sustainable development, in which she challenged private lenders to focus more on long-term value, and less on short-term profits (good luck with that!) |
| Attaining the #SDGs is imperative but low-income countries need to spend about US$0.5 trillion in 2030How can this be financed sustainably? Raising revenue, improving spending efficiency, reducing corruption & int’l community support @Lagarde #ParisForum https://t.co/T1TLmwpwF3 pic.twitter.com/1Dhy5ZEoJe | Attaining the #SDGs is imperative but low-income countries need to spend about US$0.5 trillion in 2030How can this be financed sustainably? Raising revenue, improving spending efficiency, reducing corruption & int’l community support @Lagarde #ParisForum https://t.co/T1TLmwpwF3 pic.twitter.com/1Dhy5ZEoJe |
| France’s finance minister, Bruno Le Maire, also called on both parties to calm down. | France’s finance minister, Bruno Le Maire, also called on both parties to calm down. |
| Speaking hours after America’s Robert Lighthizer accused China of eroding its commitments, Le Maire warned: | Speaking hours after America’s Robert Lighthizer accused China of eroding its commitments, Le Maire warned: |
| “We want the negotiations to stick to the principals of transparency and multilateralism. | “We want the negotiations to stick to the principals of transparency and multilateralism. |
| “I really urge everybody to avoid decisions that would threaten and jeopardise world growth in the coming months.” | “I really urge everybody to avoid decisions that would threaten and jeopardise world growth in the coming months.” |
| America’s chemicals industry has warned that hiking the tariffs on Chinese chemicals from 10% to 25% would hurt the US economy. | America’s chemicals industry has warned that hiking the tariffs on Chinese chemicals from 10% to 25% would hurt the US economy. |
| Cal Dooley, president of the American Chemistry Council (ACC), says: | Cal Dooley, president of the American Chemistry Council (ACC), says: |
| China supplies the United States with several chemicals which are not available anywhere else and which are critical inputs to U.S. manufacturing. China is also the third-largest export market for U.S. chemicals manufacturers. Future growth for our industry depends on a strong trading relationship with China and a trade policy that creates certainty and predictability for investors – not a looming threat of more or higher tariffs. | China supplies the United States with several chemicals which are not available anywhere else and which are critical inputs to U.S. manufacturing. China is also the third-largest export market for U.S. chemicals manufacturers. Future growth for our industry depends on a strong trading relationship with China and a trade policy that creates certainty and predictability for investors – not a looming threat of more or higher tariffs. |
| “We are starting to see signs that the tariffs are disrupting supply chains, cutting off markets, and eroding U.S. chemical manufacturing competitiveness. Although chemical imports from China grew by 22.7 percent in 2018, the retaliatory tariffs significantly dampened U.S. chemical exports to China, resulting in only a 2.7 percent increase in 2018 – nearly tripling the chemicals trade deficit, from $1.4 billion to $4.0 billion. | “We are starting to see signs that the tariffs are disrupting supply chains, cutting off markets, and eroding U.S. chemical manufacturing competitiveness. Although chemical imports from China grew by 22.7 percent in 2018, the retaliatory tariffs significantly dampened U.S. chemical exports to China, resulting in only a 2.7 percent increase in 2018 – nearly tripling the chemicals trade deficit, from $1.4 billion to $4.0 billion. |