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You can find the current article at its original source at https://www.theguardian.com/business/live/2019/may/15/germany-growth-gdp-markets-trade-war-us-china-business-live
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| Germany returns to growth, but US retail sales and factory output fall - business live | Germany returns to growth, but US retail sales and factory output fall - business live |
| (32 minutes later) | |
| Ahha: | |
| Delaying auto tariffs means Congress essentially has 6 months to take action in case negotiations collapse. Grassley has been drafting a bill to limit Trump’s tariff power, but talks have been slow.“We're not there yet," Rob Portman told me yesterday.https://t.co/BPa79BD5Gq | |
| The US stock market has also shaken off its early losses, as traders welcome the news that America will resist new tariffs on cars. | |
| Breaking - Stocks go positive on news Trump admin will delay auto tariffs | |
| NEWSFLASH: CNBC is reporting that Donald Trump has decided to delay imposing new tariffs on car imports by six months. | |
| If so, that’s a boost to European carmakers, and may show that the White House is reluctant to trigger a new trade dispute with the EU (who would probably retaliate with their own new tariffs). | |
| CNBC explains: | |
| The Trump administration plans to delay auto tariffs by up to six months, stopping itself for now from further widening global trade conflicts, sources told CNBC on Wednesday. | |
| The White House faces a May 18 deadline to decide whether to slap duties on car and auto part imports. By law, the administration has another 180 days to come to a decision as long as it is “negotiating” with its counterparts. Trump sees the tariffs as a way to gain leverage over trading partners such as the European Union and Japan amid trade talks. | |
| Shares in car makers, such as BMW, are suddenly rallying.... | |
| Dax jumps >12k as Bloomberg is reporting that Trump will delay imposing auto tariffs, for "up to 6 mths" on imports from the EU and Japan. This did seem to be more or less what the market had been expecting (Trump had until May 18 to make a decision). pic.twitter.com/3veGMfsgHE | |
| Auto stocks all moving higher on reports the Trump Administration plans to delay imposing higher tariffs on foreign autos and auto parts. | |
| US treasury secretary Steven Mnuchin is testifying on Capitol Hill now. | |
| He’s told lawmakers that he expects to visit Beijing soon for more trade talks - a sign that the negotiations aren’t dead in the water yet. | |
| But Mnuchin also cautions that there’s lots of work to do to reach a trade deal (a point that’s hard to argue with, as both sides have just imposed another round of tariffs) | |
| Over in New York, shares are dropping as this morning’s weak economic data worries investors. | Over in New York, shares are dropping as this morning’s weak economic data worries investors. |
| The Dow Jones industrial average has dropped by 158 points in early trading to 25,373, a drop of 0.6%. | The Dow Jones industrial average has dropped by 158 points in early trading to 25,373, a drop of 0.6%. |
| That wipes out much of Tuesday’s recovery, sending the index back towards’s Monday’s trade war-triggered lows. | That wipes out much of Tuesday’s recovery, sending the index back towards’s Monday’s trade war-triggered lows. |
| Industrial stocks are leading the selloff, following the surprise 0.5% drop in factory output last month. Caterpillar are down 1.8% and Boeing has lost 1.4%. | Industrial stocks are leading the selloff, following the surprise 0.5% drop in factory output last month. Caterpillar are down 1.8% and Boeing has lost 1.4%. |
| The 0.2% drop in retail spending last month is also worrying traders. Financial stocks are weaker this morning, with JP Morgan and Goldman Sachs both losing 1.3% in early deals. | The 0.2% drop in retail spending last month is also worrying traders. Financial stocks are weaker this morning, with JP Morgan and Goldman Sachs both losing 1.3% in early deals. |
| OOF! US factory output has fallen, for the third time in four months. | OOF! US factory output has fallen, for the third time in four months. |
| Output at America’s manufacturing firms declined by 0.5% last month, according to new figures from the Federal Reserve. | Output at America’s manufacturing firms declined by 0.5% last month, according to new figures from the Federal Reserve. |
| The decline is led by a slump in production of cars, and motor vehicle parts, which fell 2.6% in April. | The decline is led by a slump in production of cars, and motor vehicle parts, which fell 2.6% in April. |
| But even if you ignore that, then manufacturing output fell by 0.3% last month, according to the Fed. | But even if you ignore that, then manufacturing output fell by 0.3% last month, according to the Fed. |
| Business equipment shrank by 2.1%, a sharp decline, while consumer goods production fell by 1.2%. | Business equipment shrank by 2.1%, a sharp decline, while consumer goods production fell by 1.2%. |
| The Fed says: | The Fed says: |
| Most major market groups posted decreases in April. The production of consumer goods fell 1.2 percent, with declines for both durables and nondurables. The index for durable consumer goods moved down 0.8 percent, mostly because of a drop in the output of automotive products, while the output of nondurables was held down by sizable declines for both chemical products and consumer energy products. | Most major market groups posted decreases in April. The production of consumer goods fell 1.2 percent, with declines for both durables and nondurables. The index for durable consumer goods moved down 0.8 percent, mostly because of a drop in the output of automotive products, while the output of nondurables was held down by sizable declines for both chemical products and consumer energy products. |
| Production decreased for business equipment, construction supplies, and business supplies, but output advanced for defense and space equipment and for materials. Among the components of materials, a drop for durables was more than offset by gains for nondurable and energy materials. | Production decreased for business equipment, construction supplies, and business supplies, but output advanced for defense and space equipment and for materials. Among the components of materials, a drop for durables was more than offset by gains for nondurable and energy materials. |
| This, and the slide in retail sales, suggests that the world’s largest economy may be slowing. Perhaps the trade war with China is having a more serious effect than previously thought? | This, and the slide in retail sales, suggests that the world’s largest economy may be slowing. Perhaps the trade war with China is having a more serious effect than previously thought? |
| The surprise 0.2% fall in US retail sales last month is a worrying sign, say economists. | The surprise 0.2% fall in US retail sales last month is a worrying sign, say economists. |
| Andrew Hunter of Capital Economics points out that demand for clothes, computing goods was weak, as was online shopping. | Andrew Hunter of Capital Economics points out that demand for clothes, computing goods was weak, as was online shopping. |
| The decline in headline sales values came despite a near-2% m/m rise in gasoline station sales, following the 6.3% m/m surge in prices last month. | The decline in headline sales values came despite a near-2% m/m rise in gasoline station sales, following the 6.3% m/m surge in prices last month. |
| That was outweighed by a fairly sharp 1.1% m/m fall in motor vehicle sales. Even excluding those more volatile items, however, control group sales were unchanged last month, held down by weakness in electronics, clothing and non-store retail sales | That was outweighed by a fairly sharp 1.1% m/m fall in motor vehicle sales. Even excluding those more volatile items, however, control group sales were unchanged last month, held down by weakness in electronics, clothing and non-store retail sales |
| Gregory Daco of Oxford Economics is also concerned that core retail sales (stripping out volatile measures like gasoline) was weak: | Gregory Daco of Oxford Economics is also concerned that core retail sales (stripping out volatile measures like gasoline) was weak: |
| US #retail sales miss w/ -0.2% in April:- (expected) weakness in #auto sales (-1.1%)- unexpectedly weak sales electronic stores (-1.3%) & building material/garden equip (-1.9%)- online & clothing -0.2%- gasoline +1.8% (due to prices)- core retail sales disappointingly flat pic.twitter.com/UOKuq6kInA | US #retail sales miss w/ -0.2% in April:- (expected) weakness in #auto sales (-1.1%)- unexpectedly weak sales electronic stores (-1.3%) & building material/garden equip (-1.9%)- online & clothing -0.2%- gasoline +1.8% (due to prices)- core retail sales disappointingly flat pic.twitter.com/UOKuq6kInA |
| Momentum in the #retail sector has cooled in recent month driven by softer auto sales and reduced #housing activity constraining furniture & building equip sales.Clothing & online sales also softer.> #Consumer spending not as bad as Q1 indicated, but definitely softer than 2018 pic.twitter.com/j5dr63zgAj | Momentum in the #retail sector has cooled in recent month driven by softer auto sales and reduced #housing activity constraining furniture & building equip sales.Clothing & online sales also softer.> #Consumer spending not as bad as Q1 indicated, but definitely softer than 2018 pic.twitter.com/j5dr63zgAj |
| Dan Alpert of Westwood Capital says this will make it hard for retailers to raise prices: | Dan Alpert of Westwood Capital says this will make it hard for retailers to raise prices: |
| Putting aside the tariff debate (which hasn't previously impacted most retail goods manufactured in China), today's retail sales data is a verdict on the ability of wholesalers/retailers to pass through intermediate price increases to consumers.And the verdict is: they can't. | Putting aside the tariff debate (which hasn't previously impacted most retail goods manufactured in China), today's retail sales data is a verdict on the ability of wholesalers/retailers to pass through intermediate price increases to consumers.And the verdict is: they can't. |
| Futures have taken a turn for the worse after disappointing retail sales figures for April. Even sales at nonstore retailers — i.e. online/$AMZN — fell last month. | Futures have taken a turn for the worse after disappointing retail sales figures for April. Even sales at nonstore retailers — i.e. online/$AMZN — fell last month. |
| Newsflash: US retail sales have fallen unexpectedly. | 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. | 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. | 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. | 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.... | 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 | 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. | 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.” |