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| Germany shrugs off recession fears, but US retail sales fall - business live | |
| (32 minutes later) | |
| Futures have taken a turn for the worse after disappointing retail sales figures for April. Even sales at nonstore retailers — i.e. online/$AMZN — fell last month. | |
| Newsflash: US retail sales have fallen unexpectedly. | |
| Retail sales declined by 0.2% in April, rather worse than the 0.2% rise expected by economists. That follows a 1.7% rise in March. | |
| Auto sales slumped by over 1%, dragging the wider spending measure down. | |
| This is a disappointment, suggesting US economic activity may have dipped last month. | |
| Investors are already piling into US government bonds, pushing down the yield (or interest rates) on Treasuries. They may be concluding that a US interest rate cut is looking more likely.... | |
| US 2y yields drop below 2.15%, lowest since Feb2018 as retail sales fall 0.2%, missing expectations. pic.twitter.com/YiI8qzksxe | |
| Having slumped on Monday, and rallied on Tuesday, Wall Street is expected to dip back into the red when trading begins in an hour’s time. | Having slumped on Monday, and rallied on Tuesday, Wall Street is expected to dip back into the red when trading begins in an hour’s time. |
| US Opening Calls:#DOW 25469 -0.27%#SPX 2825 -0.34%#NASDAQ 7372 -0.36%#IGOpeningCall | US Opening Calls:#DOW 25469 -0.27%#SPX 2825 -0.34%#NASDAQ 7372 -0.36%#IGOpeningCall |
| The US-China trade war, escalating tensions between the US and Iran, and the weak Chinese data overnight could all weigh on shares. | The US-China trade war, escalating tensions between the US and Iran, and the weak Chinese data overnight could all weigh on shares. |
| Brad Bechtel of financial group Jefferies explains: | Brad Bechtel of financial group Jefferies explains: |
| It does seem the trade war tensions are going to be here to stay for the time being and you have rising tensions in the Middle East with drone strikes and issues in the Strait of Hormuz etc. There is talk of more sanctions on Hungarian citizens in the wake of Trump’s visit with Orban and that just illustrates the tug of war going on in Eastern Europe as China and Russia continue to assert themselves with member countries of the Belt and Road [China’s huge infrastructure spending project]. | It does seem the trade war tensions are going to be here to stay for the time being and you have rising tensions in the Middle East with drone strikes and issues in the Strait of Hormuz etc. There is talk of more sanctions on Hungarian citizens in the wake of Trump’s visit with Orban and that just illustrates the tug of war going on in Eastern Europe as China and Russia continue to assert themselves with member countries of the Belt and Road [China’s huge infrastructure spending project]. |
| The talk last night was around the soft data out of China and some of the rest of the region and the narrative became that China would likely provide more stimulus as a result which should be good for asset markets. | The talk last night was around the soft data out of China and some of the rest of the region and the narrative became that China would likely provide more stimulus as a result which should be good for asset markets. |
| But it’s not always as simple as that. Bechtel adds: | But it’s not always as simple as that. Bechtel adds: |
| The bad is good scenario for why risk assets should rally on poor data. The problem with that narrative is that it works until it doesn’t. If the data becomes so bad that stimulus isn’t going to be enough to rescue it then the house of cards falls apart. Speaking mostly of equity prices and the reaction function to negative data, not about China as a whole. I am not a China is going to implode type of guy, I actually think they will hold in just fine albiet at a lower level of growth. My point is more that we are in for a rocky ride. | The bad is good scenario for why risk assets should rally on poor data. The problem with that narrative is that it works until it doesn’t. If the data becomes so bad that stimulus isn’t going to be enough to rescue it then the house of cards falls apart. Speaking mostly of equity prices and the reaction function to negative data, not about China as a whole. I am not a China is going to implode type of guy, I actually think they will hold in just fine albiet at a lower level of growth. My point is more that we are in for a rocky ride. |
| The pound is weakening today as traders brace for another instalment in Britain’s least favourite saga - Brexit. | The pound is weakening today as traders brace for another instalment in Britain’s least favourite saga - Brexit. |
| Sterling has shed a third of a cent against the US dollar to $1.287, a three-week low, after the government confirmed it will bring its Withdrawal Deal back to parliament again. | Sterling has shed a third of a cent against the US dollar to $1.287, a three-week low, after the government confirmed it will bring its Withdrawal Deal back to parliament again. |
| This will give MPs the chance to reject it for the fourth time, given the lack of progress in the cross-party talks between the Conservative government and the Labour opposition. | |
| cable 1.2890. breached 1.29, now eyes the key late April low test at 1.2860 pic.twitter.com/pW3sRU6eea | cable 1.2890. breached 1.29, now eyes the key late April low test at 1.2860 pic.twitter.com/pW3sRU6eea |
| Bad news for Germany....Allianz economist Katharina Utermöhl fears that growth will soon fizzle out, unless there is a trade war breakthrough. | Bad news for Germany....Allianz economist Katharina Utermöhl fears that growth will soon fizzle out, unless there is a trade war breakthrough. |
| She predicts that the economy “is likely to lose momentum” in the months ahead, having bounced back in the last quarter: | She predicts that the economy “is likely to lose momentum” in the months ahead, having bounced back in the last quarter: |
| In view of the difficult global environment, a V-shaped recovery in industry is not on the cards and domestic demand is likely to slow without tailwind from foreign trade.” | In view of the difficult global environment, a V-shaped recovery in industry is not on the cards and domestic demand is likely to slow without tailwind from foreign trade.” |
| Back in Germany, police, prosecutors and tax investigators have launched a series of raids today, looking for evidence of tax fraud. | Back in Germany, police, prosecutors and tax investigators have launched a series of raids today, looking for evidence of tax fraud. |
| The probe is centred on Deutsche Bank, and allegations that some wealthy customers hid money in offshore companies. | The probe is centred on Deutsche Bank, and allegations that some wealthy customers hid money in offshore companies. |
| According to Bloomberg, eight suspects’ homes were raided, along with offices of more than 20 banks, tax advisers and asset-management companies. | According to Bloomberg, eight suspects’ homes were raided, along with offices of more than 20 banks, tax advisers and asset-management companies. |
| The Financial Times has more details: | The Financial Times has more details: |
| German criminal prosecutors, police and tax investigators this morning began raiding eleven German lenders looking for evidence of suspected tax fraud by clients of a former Deutsche Bank offshore unit. | German criminal prosecutors, police and tax investigators this morning began raiding eleven German lenders looking for evidence of suspected tax fraud by clients of a former Deutsche Bank offshore unit. |
| The raids are taking place in Frankfurt and six other cities across Germany and involve officers from the Federal Criminal Police, the Hamburg State Office of Criminal investigation and six different regional tax authorities. Eight individuals who were clients of a British Virgin Islands-based former Deutsche Bank unit are in the crosshairs of the investigators. | The raids are taking place in Frankfurt and six other cities across Germany and involve officers from the Federal Criminal Police, the Hamburg State Office of Criminal investigation and six different regional tax authorities. Eight individuals who were clients of a British Virgin Islands-based former Deutsche Bank unit are in the crosshairs of the investigators. |
| German authorities raid 11 banks in tax fraud probe. Another headache for @DeutscheBank that could really do with a few weeks w/ no negative headlines @OlafStorbeck https://t.co/mcAwDO5npt via @financialtimes | German authorities raid 11 banks in tax fraud probe. Another headache for @DeutscheBank that could really do with a few weeks w/ no negative headlines @OlafStorbeck https://t.co/mcAwDO5npt via @financialtimes |
| Deutsche Bank has tweeted about the raids, saying its offices are not among the ones searched: | Deutsche Bank has tweeted about the raids, saying its offices are not among the ones searched: |
| The investigations today are not directed against Deutsche Bank. The public prosecutor's office is investigating private individuals. Deutsche Bank cooperates and voluntarily submits all requested documents. A search of our business premises has therefore not taken place. | The investigations today are not directed against Deutsche Bank. The public prosecutor's office is investigating private individuals. Deutsche Bank cooperates and voluntarily submits all requested documents. A search of our business premises has therefore not taken place. |
| President Xi also told his fellow Asian leaders that countries shouldn’t dictate to each other -- another jibe at America’s foreign policy approach? | President Xi also told his fellow Asian leaders that countries shouldn’t dictate to each other -- another jibe at America’s foreign policy approach? |
| “Exchanges and mutual learning among civilizations should be reciprocal and equal. | “Exchanges and mutual learning among civilizations should be reciprocal and equal. |
| They should be diversified and multidirectional, rather than compulsory or coercive. They should not be one-way.” | They should be diversified and multidirectional, rather than compulsory or coercive. They should not be one-way.” |
| China’s president has blasted trade protectionism in his first major speech since the US imposed higher tariffs on $200bn of Chinese goods. | China’s president has blasted trade protectionism in his first major speech since the US imposed higher tariffs on $200bn of Chinese goods. |
| Opening the Conference on Dialogue of Asian Civilizations in Beijing, Xi Jinping urged countries not to “close their doors and hide behind them -- a clear signal to Washington. | Opening the Conference on Dialogue of Asian Civilizations in Beijing, Xi Jinping urged countries not to “close their doors and hide behind them -- a clear signal to Washington. |
| Xi also criticised as “just stupid” those who think their race are superior to others. | Xi also criticised as “just stupid” those who think their race are superior to others. |
| CNN has more details: | CNN has more details: |
| Opening the Conference on Asian Civilizations Dialogue in Beijing on Wednesday, Xi said there was no need for “civilizations to clash with each other.””No civilization is superior over others. | Opening the Conference on Asian Civilizations Dialogue in Beijing on Wednesday, Xi said there was no need for “civilizations to clash with each other.””No civilization is superior over others. |
| The thought that one’s own race and civilization are superior and the inclination to remold or replace other civilizations are just stupid,” he said, adding to do so would invite “catastrophic consequences.” | The thought that one’s own race and civilization are superior and the inclination to remold or replace other civilizations are just stupid,” he said, adding to do so would invite “catastrophic consequences.” |
| Nancy Curtin, chief investment officer of Close Brothers Asset Management, has welcomed the pick-up in eurozone growth last quarter. | Nancy Curtin, chief investment officer of Close Brothers Asset Management, has welcomed the pick-up in eurozone growth last quarter. |
| “Growth in the EU continues to beat expectations, proving the disastrous beginning of the year to be an anomaly. While the region has a long way to go, things are looking up; the services and housebuilding sectors are doing better than expected, eurozone unemployment is at a ten year low, and wage growth is beginning to improve. This should help consumer confidence and, in turn, consumption. | “Growth in the EU continues to beat expectations, proving the disastrous beginning of the year to be an anomaly. While the region has a long way to go, things are looking up; the services and housebuilding sectors are doing better than expected, eurozone unemployment is at a ten year low, and wage growth is beginning to improve. This should help consumer confidence and, in turn, consumption. |
| However, she also warns that the US-China trade war could Europe, so governments may need to boost spending to help the economy: | However, she also warns that the US-China trade war could Europe, so governments may need to boost spending to help the economy: |
| The eurozone is an export-led economy, and global trade is at its weakest in a decade. Trade tensions continue to take centre stage for the world economy, looming as a circuit breaker to global recovery. Unless we reach resolution, the EU must be open to fiscal intervention to avoid a downturn.” | The eurozone is an export-led economy, and global trade is at its weakest in a decade. Trade tensions continue to take centre stage for the world economy, looming as a circuit breaker to global recovery. Unless we reach resolution, the EU must be open to fiscal intervention to avoid a downturn.” |
| Employment growth across the eurozone has also picked up, in another encouraging sign for the region: | Employment growth across the eurozone has also picked up, in another encouraging sign for the region: |
| Euro area employment growth picks up again, to an annualised rate of 1.4% in Q1 (+0.3% QoQ). pic.twitter.com/HHKgsA8sEH | Euro area employment growth picks up again, to an annualised rate of 1.4% in Q1 (+0.3% QoQ). pic.twitter.com/HHKgsA8sEH |
| We now have confirmation that the eurozone grew by 0.4% in the first quarter of 2019. | We now have confirmation that the eurozone grew by 0.4% in the first quarter of 2019. |
| That matches the initial estimate two weeks ago (before this morning’s German GDP had been calculated), and is twice as fast as in Q4 2018. | That matches the initial estimate two weeks ago (before this morning’s German GDP had been calculated), and is twice as fast as in Q4 2018. |
| Eurostat has also confirmed that the wider European Union grew by 0.5%, with the UK one of the best-faring major economies. | Eurostat has also confirmed that the wider European Union grew by 0.5%, with the UK one of the best-faring major economies. |
| However, that’s still slower than the US which managed 0.8% growth last quarter | However, that’s still slower than the US which managed 0.8% growth last quarter |
| Here’s some highlights from the EU: | Here’s some highlights from the EU: |
| Eurozone: +0.4% quarter-on-quarter | Eurozone: +0.4% quarter-on-quarter |
| European Union: +0.5% | European Union: +0.5% |
| Spain: +0.7% | Spain: +0.7% |
| UK: +0.5% | UK: +0.5% |
| Netherlands: +0.5% | Netherlands: +0.5% |
| Portugal: +0.5% | Portugal: +0.5% |
| Germany: +0.4% | Germany: +0.4% |
| France: +0.3% | France: +0.3% |
| Austria: +0.3% | Austria: +0.3% |
| Euro area #GDP +0.4% in Q1 2019, +1.2% compared with Q1 2018: flash estimate from #Eurostat https://t.co/dyguU4HN6Y pic.twitter.com/7UB6dgTAmO | Euro area #GDP +0.4% in Q1 2019, +1.2% compared with Q1 2018: flash estimate from #Eurostat https://t.co/dyguU4HN6Y pic.twitter.com/7UB6dgTAmO |
| Back in the eurozone, Portugal has posted solid growth in the last quarter. | Back in the eurozone, Portugal has posted solid growth in the last quarter. |
| Portuguese GDP increased by 0.5% in January-March, a little faster than Germany, matching the UK’s growth rate for Q1. | Portuguese GDP increased by 0.5% in January-March, a little faster than Germany, matching the UK’s growth rate for Q1. |
| Domestic spending and investment drove growth. | Domestic spending and investment drove growth. |
| #Portugal #GDP Growth Rate QoQ Prel at 0.5% https://t.co/o9PhlMR2av pic.twitter.com/1NDm93FlXX | #Portugal #GDP Growth Rate QoQ Prel at 0.5% https://t.co/o9PhlMR2av pic.twitter.com/1NDm93FlXX |
| In another worrying sign, China’s fixed-asset investment growth also slowed last month. | In another worrying sign, China’s fixed-asset investment growth also slowed last month. |
| FAI grew 6.1% year on year in the first four months of 2019, down from 6.3% in January-March alone, the National Bureau of Statistics reported. | FAI grew 6.1% year on year in the first four months of 2019, down from 6.3% in January-March alone, the National Bureau of Statistics reported. |
| That shows companies are cutting back on new equipment and property, as the trade war with the US hits demand. | That shows companies are cutting back on new equipment and property, as the trade war with the US hits demand. |
| Fears grow that tariffs will hurt a H2 recovery in #China after data disappoints again. pic.twitter.com/7ts9DE7ZHe | Fears grow that tariffs will hurt a H2 recovery in #China after data disappoints again. pic.twitter.com/7ts9DE7ZHe |
| Today’s disappointing Chinese economic data isn’t a blip. | Today’s disappointing Chinese economic data isn’t a blip. |
| As this tweet shows, retail sales and business investment growth have been slowing for months, while industrial production has been jittery: | As this tweet shows, retail sales and business investment growth have been slowing for months, while industrial production has been jittery: |
| With markets in rebound mode, it was a good day for Chinese data to disappoint. Chart shows yoy changes in YTD data to smooth out fluctuations. Investment (blue) looks to have stabilised since mid-2018 but retail sales (red) are still decelerating. IP (white) is inconclusive. pic.twitter.com/8h8NIH8zJO | With markets in rebound mode, it was a good day for Chinese data to disappoint. Chart shows yoy changes in YTD data to smooth out fluctuations. Investment (blue) looks to have stabilised since mid-2018 but retail sales (red) are still decelerating. IP (white) is inconclusive. pic.twitter.com/8h8NIH8zJO |
| European stock markets have fallen into the red this morning, despite the encouraging news from Germany. | European stock markets have fallen into the red this morning, despite the encouraging news from Germany. |
| Instead, the disappointing slowdown in China’s retail sales and industrial output growth is worrying investors, coming on top of the existing trade war jitters. | Instead, the disappointing slowdown in China’s retail sales and industrial output growth is worrying investors, coming on top of the existing trade war jitters. |
| Italy’s FTSE MIB is the worst performer, down 0.7% after deputy prime minister Matteo Salvini threatened to break EU budget rules yesterday. | Italy’s FTSE MIB is the worst performer, down 0.7% after deputy prime minister Matteo Salvini threatened to break EU budget rules yesterday. |
| The French CAC and German DAX are both down 0.5%, while the UK’s FTSE 100 is basically flat. | The French CAC and German DAX are both down 0.5%, while the UK’s FTSE 100 is basically flat. |