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Stock markets fall amid US-China trade tensions – business live Stock markets fall as ECB adds to warnings on trade war – business live
(about 5 hours later)
Rare earths are truly in focus today: shares in Rainbow Rare Earths have jumped by 11% after China’s barely veiled threat to use its hold on the supply of the valuable minerals in the trade dispute with the US. The mayors of Greater Manchester and Liverpool city region have called on the transport secretary to terminate the Northern rail franchise after a year of sustained misery for passengers.
China is not known as a commodities superpower – it is still notably dependent on imports of oil and gas – but what it does have it appears determined to use as leverage in the battle with Trump’s White House. Speaking on behalf of the 4.3 million people they represent, Andy Burnham and Steve Rotheram made the demand 12 months on from last May’s timetable chaos, writes the Guardian’s Helen Pidd.
The value of rare earth metals comes in advanced electronics particularly for their magnetic properties. They complain of a litany of failures, with nearly a fifth of all services arriving late following years of underinvestment.
Here’s a handy list of them. In a separate (but perhaps emblematic) move, the Department for Transport yesterday announced a plan to use the infamous Pacer trains currently in service as, er, village halls.
European stock markets have taken a heavy tumble as well at the open. Read more here:
The FTSE 100 and FTSE 250 are both down by 0.7%. Manchester and Liverpool mayors call for termination of Northern rail
Germany’s Dax is down by 1%, France’s Cac 40 is down by 1.2%, and the broad Stoxx index has lost 0.85% in early trading. European stock markets are all still very much in the red just after the middle of the trading day in London.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. The FTSE 100 is down by 1.4%, while the mid-cap FTSE 250 has lost 1%.
There is not much positive feeling around on markets this morning, with macroeconomic fears and trade tensions in the air. Asian markets have fallen, with Japan’s Topix down by 0.9% and Hong Kong’s Hang Seng index down by 0.35%. The City regulator has banned a former trader who was cleared of rigging the Libor interest rate, saying he acted dishonestly and lacked integrity.
Yields on benchmark government bonds (which move inversely to prices) have fallen as investors have pivoted to safety. The US 10-year Treasury bond fell to as low as 2.226%, its lowest level since September 2017. Terry Farr arranged nine “wash trades” with no commercial purpose in a bid to gain brokerage payments between 19 September 2008 and 25 August 2009, the Financial Conduct Authority found.
It is fairly easy to understand the nervy feel, with the trade dispute between the US and China still very much in focus. Chinese newspapers today signalled that rare earths could be the next front in the trade dispute. Commentaries suggested the country could use its dominant position as a supplier of the valuable minerals to the US in the trade dispute with Donald Trump’s White House. Farr was a broker on the Japanese yen desk at Martins, a relatively small brokerage which arranged transactions of currencies and derivatives between financial institutions. He was acquitted of participating in fixing Libor (the London Interbank Offered Rate) in January 2016.
Here’s the editor of the state-controlled Global Times: The wash trades meant that Martins received unwarranted brokerage of £258,151, the FCA said, increasing his bonus pool.
Based on what I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future. Mark Steward, executive director of enforcement and market oversight at the FCA, said:
In the EU, Italy has been adding to nerves, with strong words from far-right deputy prime minister Matteo Salvini suggesting that he may be up for another stand-off over running a budget deficit – a grim prospect for investors. There was no legitimate reason for Mr Farr to make these trades and his actions were motivated by greed. His actions mean he has no place in financial services.
The arm wrestle over who will take the top jobs began yesterday, with France’s Emmanuel Macron pointedly snubbing Angela Merkel’s preferred (centre-right) candidate for European Commission president, Manfred Weber. The European Central Bank is the other (arguably more) important job that will be up for grabs. Today’s ban reflects our commitment to making sure that people working in financial services act with integrity.
Macron and the centrist ALDE group could be kingmakers in the European parliament, with a decision due at the next leaders’ summit on 20-21 June. Stock markets across Europe have fallen on Wednesday morning amid concerns over global growth. Economists are eyeing the trade dispute between the US and China as the most prominent threat to the long-running expansion.
The agenda The European Central Bank warned that the trade war could harm the global economy, and that a slowdown could be the trigger to a bout of financial instability.
8am BST: European Central Bank speech by Jens Weidmann ECB vice-president Luis De Guindos this morning told reporters that “a trade war is the main risk to the economy globally.”
8:30am BST: European Central Bank speech by Yves Mersch The ECB report said:
8:55am BST: Germany unemployment rate (May) Weaker than expected growth and a possible escalation of trade tensions could trigger further falls in asset prices.
9am BST: European Central Bank financial stability review The dispute over tariffs and trade between the US and China, sparked by US President Donald Trump, has unsettled investors through fears of higher import taxes that could slow trade and growth.
9am BST: Italy consumer confidence (May) In other news:
3pm BST: Bank of Canada interest rate decision The ECB also sent a warning to Italy that its debt may be unsustainable.
German unemployment rose for the first time since 2013.
Tesco and Sainsbury’s have both lost market share, according to Kantar.
Oil prices have fallen amid concerns over demand.
Here is some interesting news in the battle for the Conservative party leadership – and hence to be the UK’s next prime minister: Boris Johnson will have to appear in court to face allegations of misconduct.
The summons to court follows a crowdfunded move to launch a private prosecution of the MP, who is currently the frontrunner in the Tory leadership contest, writes the Guardian’s Ben Quinn.
Johnson lied and engaged in criminal conduct when he repeatedly claimed during the 2016 EU referendum that the UK sent £350m a week to Brussels, lawyers for Marcus Ball, a 29-year-old businessman who has launched the prosecution bid, told a court last week.
Read more here:
Boris Johnson to appear in court over misconduct claims
The risk-off attitude among investors is making its mark on oil markets as well.
Futures for Brent crude, the North Sea benchmark, are down by 2% today to below $69 per barrel. It earlier hit lows of $68.44.
Futures for the US benchmark, West Texas Intermediate, fell by 2.2% to $57.83 per barrel.
Prices have rallied steadily from around $50 per barrel at Christmas to almost $75 in April, but have retreated in the face of concerns over demand as investors await the inevitable slowdown in global growth.
Back in the markets, the FTSE 100 has now lost more than 100 points for the day, or 1.5%. It’s a fairly broad-based sell-off across sectors, with Ocado now the biggest faller, down 5.4% so far.
Every major European index has lost well over 1% so far. France’s Cac 40 is down by 1.8%, Germany’s Dax is down by 1.4%, and Italy’s FTSE MIB has lost 1.5%.
On currency markets, sterling has dipped by 0.14% against the US dollar and 0.1% against the euro. The US dollar index, based on a trade-weighted basket of currencies, is up by 0.1% overall.
There is also an interesting chapter on the climate crisis in the European Central Bank’s financial stability review.
Central banks have become increasingly vocal on the dangers posed by global heating – albeit couched in language about exposures to financial risks.
The report said:
While significant macroeconomic impacts from climate change may occur in the more distant future, some impacts are already beginning to be felt.
There are “key gaps” in data on the financial sector’s exposure to climate risks, the ECB warned. However, what data there is appears to show an increasing toll from the climate crisis in recent years.
Risks to the eurozone from a no-deal Brexit – still a possibility after 31 October – are “manageable”, but there is the small possibility that disruption could coincide with another global shock with damaging consequences, the ECB says.
The financial stability review says:
There remain tail macro-financial risks whereby a no-deal Brexit interacts with other global shocks, in an environment where risks to the euro area growth outlook are tilted to the downside.
If such a scenario occurs, the impact would likely be concentrated on particular countries, such as those with significant ties to the UK.
Such a shock could dent eurozone GDP growth, along with an “even more significant macroeconomic shock in the UK”.
Downside risks to the growth outlook “appear prominent”, the ECB warns, and Italy is particularly in the crosshairs.
“Country-specific debt sustainability concerns” are a problem, the central bank warns. In case you don’t know which country, they provide a handy chart with a large “IT” in the corner: