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.
Eurozone growth forecasts slashed; trade war hits markets - business live
Wall Street slides as trade war fears hit shares - business live
(about 6 hours later)
Newsflash: The European Commission has cut its growth forecast for the eurozone, and warned that trade disputes have hurt economic growth.
Marketwatch have a good reminder of why trade tensions at soaring, for anyone trying to catch up with today’s drama:
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%.
U.S. Trade Representative Robert Lighthizer said Monday that the Trump administration will increase tariffs on $200 billion in Chinese goods early Friday. The prospect of higher tariffs had been first raised on Sunday by President Donald Trump, rattling investors who had anticipated that better progress toward a near-term resolution between the two superpowers.
In its new economic forecasts, the EC singles out trade tensions:
In a briefing, Treasury Secretary Steven Mnuchin, along with Lighthizer, told reporters that the U.S. administration was made aware over the weekend that China was trying to back away from “some of the language” that had been hammered out in prior talks.
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.
U.S. officials said that tariffs on those Chinese goods will rise from 10% to 20% at 12:01 a.m. Eastern time Friday, and markets will likely be monitoring China for further reaction.
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.
US consumers and Chinese factories would both suffer if Donald Trump delivers on his threat to impose tariffs on all imports from China.
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).
As this chart shows, toys, clothing and footwear would all be affected (and remember, it’s the importers who pay the tariff).
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!
President Trump tweeted he would "shortly" impose 25% tariffs on the rest of US imports from China not yet targeted with Section 301 tariffs. This would mostly hit final consumer products, such as toys, footwear, clothing, and electronics. #PIIECharts https://t.co/FEUFyE0rqH pic.twitter.com/WYfYga4zYC
Trade war anxiety has dragged India’s main stock index, the Sensex, down 0.8% today to a five-week low.
Hold onto your hats! The Dow is now down 542 points, or 2%, at 25,896, as the rout intensifies.
It’s not been a great morning in Europe’s stock markets, with most continental bourses adding to Monday’s losses.
It's like the markets are on a time delay. They are finally realizing tariffs are going up to 25% on Friday.
US commodity prices are dropping in early trading in Chicago.
The old City saying “Sell in May and go away” could prove prescient this year.
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 only taken a handful of trading days to wipe out April’s gains, which led Wall Street to several record highs.
It’s been a horrible mess in grains. #wheat #corn #soybeans pic.twitter.com/aAnDnQVlkV
2019 had been a good year for shares - but trade war tensions could yet destroy recent gains....
European stock markets are also being dragged down by some weak industrial data from Germany.
The Dow Jones industrial average has now fallen though the 26,000 point mark, on track for its lowest close in a month.
Germany factory orders only rose by 0.6% in March, weaker than the 1.5% increase which economists expected.
The Dow is down 463 points, or 1.75%, at 25,975 as New York traders try to cram in a quick lunch.
On an annual basis, orders were 6% lower than a year ago - highlighting how German manufacturing has struggled in the last year.
Industrial and tech stock such as Boeing, Apple and Intel are among the major fallers; they’ll all suffer from a longer or more intense trade war.
Although foreign orders rose by 4.2% (led by the eurozone), this was wiped out by a 4.2% decline in domestic demand.
Newsflash: Britain’s stock market has closed at a five-week low.
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
The FSTE 100 has ended the day down 120 points, or 1.6%, at 7,260 points. That’s the lowest level since the end of March, and the biggest one-day fall since 22 March.
Today’s losses have dragged the FTSE 100 down to a one-month low:
Manufacturing group Melrose led the fallers, down 5.8%, followed by packaging firm Mondi (down 3.9%).
Neil MacKinnon, global macro strategist at VTB Capital, says investors fear the trad war negotiations could collapse:
The FTSE 250 index also fell sharply, losing 1.2%.
“President Trump’s threat to increase tariffs on Chinese imports is denting market sentiment and creating unnecessary volatility especially in equity markets.
European markets didn’t manage a late revival; the Stoxx 600 index ended down 1.5% in a wide-spread sell-off triggered by trade war worries.
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”
Stocks are also falling further on Wall Street, with the Dow Jones industrial average currently 420 points in the red.
The selloff is gathering pace, as anxiety over the US-China trade dispute bubbles away.
Stocks hit fresh session lows; Dow off more than 420 points https://t.co/HAi4eL6PlP pic.twitter.com/sYUagCLbBg
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.
Donald Trump and the European Commission have combined to drive European stocks down today, says David Madden of CMC Markets.
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.
He writes:
The FSE 250, which contains smaller UK-focused companies, has shed 0.8%
Stock markets in Europe have suffered severe declines as US-China trade tensions have heightened. The US already imposes a 10% levy on $200 billion worth of Chinese imports, and there is a fear it will be raised to 25% later this week, and the US has also threatened to impose tariffs on $325 billion worth of Chinese imports. The announcement has rocked investment sentiment, and has prompted traders to dump stocks.
The French CAC and German DAX are now both down around 0.5%, adding to Monday’s losses.
To make matters worse for investors, the EU have lowered their growth outlook for the eurozone, and it now expects 2019 growth to be 1.2%, and the previous forecast was 1.3% ,and the growth forecast for 2020 has been lowered to 1.5% from 1.6%. The timing of the EU’s announcement isn’t great, but global trade tensions are likely to hurt the region.
The news that China’s top negotiator Liu He is still heading to Washington later this week hasn’t provided much cheer to invesors.
There’s no sign of a turnaround on Wall Street yet.
Fiona Cincotta, analyst at City Index, says the looming thread of fresh tariffs is worrying the City.
The Dow is now down 394 points, or 1.5%, at 26,044, threatening to fall through yesterday’s low points.
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.
Trump’s threat to hike the tariffs on imports from China has brought volatility roaring back into the markets this week.
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 VIX index (commonly known as the fear gauge) has jumped to its highest level since the end of January.
Back in the UK, car sales have fallen again as private buyers shun the market.
Looking for an excuse to take profit? Try a Google search #vix #stocks pic.twitter.com/AUjn3jU39k
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.
European stock markets are now in retreat, after today’s growth downgrades dampened the mood.
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 German DAX and French CAC are both down around 1.4%, as electronic red ink runs across the bourses again.
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
Connor Campbell of SpreadEx says:
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.
A couple of unpleasant revisions to the EU’s economic forecasts only added to the Tuesday’s sense of unease, the markets crumbling under the renewed trade tensions.
The IMF chief says:
Manufacturing and technology stocks are leading the sell-off in New York.
We thought this threat was waning and relations were improving and we were moving toward an agreement.
Boeing has lost 2%, followed by Microsoft (-1.8%) , Apple and Intel (both down 1.6%) and Pfizer (down 1.5%).
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.
Speaking at a finance conference in Paris, Christine Lagarde told reporters that the world economy would suffer from further escalation.
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,”.
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
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:
“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.”
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:
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.
