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China accuses US of 'naked economic terrorism' in trade dispute – business live | China accuses US of 'naked economic terrorism' in trade dispute – business live |
(30 minutes later) | |
Perhaps more interestingly, Ramsden also suggests that markets may be too sanguine about the risks facing them – and that when investors finally wake up to the dangers it could make for more dramatic market moves. | |
The key piece of evidence he cites is the divergence between policy uncertainty and the Vix – the so-called fear index which measures the volatility of trading on the S&P 500. | |
Ramsden said: | |
The Vix has risen far less than the policy uncertainty index in recent months, suggesting market participants see relatively little risk of major disruption. It has picked up a little in the recent data as US-China trade tensions intensified, but has also fallen back to below historical averages. | |
This apparent disconnect does not necessarily mean that markets are complacent – the policy uncertainty index might be more sensitive to short-term political developments, while market indices could also be factoring in a belief that monetary policy might be able to offset the impact of shocks. But if market participants are underestimating the extent of political risks materialising, that suggests the potential for sharp price corrections if those shocks do come about. | |
Dave Ramsden, the Bank of England deputy governor with a mandate for markets and banking, is currently making a speech on “resilience” following the financial crisis. | |
First up, on Brexit he is unsurprisingly cautious. Ramsden would want to wait and see on the effects of a no-deal Brexit before changing monetary policy. | |
A no-deal Brexit – with no transition to trade on World Trade Organisation rules – is “unarguably [the] biggest risk to the UK economy and UK financial stability”, he said. | |
But Ramsden (an outside shot at the top job once Mark Carney leaves) also reiterated the Bank’s position that the financial sector would be resilient (there’s the title) to the shock. | |
Shares in De La Rue – the loser in the battle to make the UK’s post-Brexit blue passports – have fallen to their lowest level since September 2005 in early trading after the departure of the chief executive. | Shares in De La Rue – the loser in the battle to make the UK’s post-Brexit blue passports – have fallen to their lowest level since September 2005 in early trading after the departure of the chief executive. |
De La Rue has lost 22%, trading at 356p, after boss Martin Sutherland stepped down amid a 77% plunge in pre-tax profits. | De La Rue has lost 22%, trading at 356p, after boss Martin Sutherland stepped down amid a 77% plunge in pre-tax profits. |
The company, which also makes banknotes, lost a highly publicised battle for a £490m contract to print the UK’s post-Brexit passport in 2018. The contract went to Franco-Dutch company Gemalto. | The company, which also makes banknotes, lost a highly publicised battle for a £490m contract to print the UK’s post-Brexit passport in 2018. The contract went to Franco-Dutch company Gemalto. |
You can read more here: | You can read more here: |
De La Rue boss to step down after losing UK passport print contract | De La Rue boss to step down after losing UK passport print contract |
Chancellor Philip Hammond’s days in the UK’s top finance job may be numbered, given Theresa May’s imminent departure as prime minister – and the palpable dislike of Brexit-backing MPs for his support for remaining in the EU. | Chancellor Philip Hammond’s days in the UK’s top finance job may be numbered, given Theresa May’s imminent departure as prime minister – and the palpable dislike of Brexit-backing MPs for his support for remaining in the EU. |
He appears to be enjoying a little more freedom, given comments this morning to Sky News suggesting he could not serve in a no-deal Brexit cabinet. He said: | He appears to be enjoying a little more freedom, given comments this morning to Sky News suggesting he could not serve in a no-deal Brexit cabinet. He said: |
I couldn’t support a government policy stance that said as a matter of choice we are going to pursue a no-deal exit. | I couldn’t support a government policy stance that said as a matter of choice we are going to pursue a no-deal exit. |
Hammond – who says he has never defied the Conservative whip in 22 years as an MP – also did not rule out voting against a Tory government to block no deal. He said: | Hammond – who says he has never defied the Conservative whip in 22 years as an MP – also did not rule out voting against a Tory government to block no deal. He said: |
The national interest trumps party interest. If I am presented with a difficult choice, I will act with what I believe will be the best interests of the country. | The national interest trumps party interest. If I am presented with a difficult choice, I will act with what I believe will be the best interests of the country. |
The FTSE 100 is up by about 0.1% at the open across Europe, while the Euro Stoxx 600 has gained 0.2%. | The FTSE 100 is up by about 0.1% at the open across Europe, while the Euro Stoxx 600 has gained 0.2%. |
France’s Cac 40 and Spain’s Ibex index are both up by 0.4%. | France’s Cac 40 and Spain’s Ibex index are both up by 0.4%. |
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
Some economists are uneasy with describing an economic dispute as a “trade war”. But when senior diplomats – usually so, well, diplomatic – start throwing around terms like “terrorism”, investors generally take note. | Some economists are uneasy with describing an economic dispute as a “trade war”. But when senior diplomats – usually so, well, diplomatic – start throwing around terms like “terrorism”, investors generally take note. |
Provoking trade disputes is “naked economic terrorism”, a senior Chinese diplomat said on Thursday, in a clear escalation of rhetoric which signals that there is likely a long way to go for investors awaiting an easing of tensions. | Provoking trade disputes is “naked economic terrorism”, a senior Chinese diplomat said on Thursday, in a clear escalation of rhetoric which signals that there is likely a long way to go for investors awaiting an easing of tensions. |
When asked about the trade war with the United States in Beijing, Chinese vice foreign minister Zhang Hanhui gave a clear message on the country’s willingness to fight back. According to Reuters, he said: | When asked about the trade war with the United States in Beijing, Chinese vice foreign minister Zhang Hanhui gave a clear message on the country’s willingness to fight back. According to Reuters, he said: |
We oppose a trade war but are not afraid of a trade war. This kind of deliberately provoking trade disputes is naked economic terrorism, economic chauvinism, economic bullying. | We oppose a trade war but are not afraid of a trade war. This kind of deliberately provoking trade disputes is naked economic terrorism, economic chauvinism, economic bullying. |
Concerns over trade have weighed on markets so far this week, provoking steep stock market falls yesterday after rare earth minerals appeared likely to become the latest front in the dispute. With two more trading days left in May, the S&P 500 is heading for a loss of 5.5% – its first monthly loss since December. | Concerns over trade have weighed on markets so far this week, provoking steep stock market falls yesterday after rare earth minerals appeared likely to become the latest front in the dispute. With two more trading days left in May, the S&P 500 is heading for a loss of 5.5% – its first monthly loss since December. |
Asian markets were for the most part in negative territory (with the exception of South Korea’s Kospi 200 index, which gained 1%) on Thursday. Japan’s Topix and Nikkei 225 indices fell by 0.3%, while the CSI 300 index, which tracks the biggest companies traded in Shanghai and Shenzhen, fell by 0.8% at the time of writing. | Asian markets were for the most part in negative territory (with the exception of South Korea’s Kospi 200 index, which gained 1%) on Thursday. Japan’s Topix and Nikkei 225 indices fell by 0.3%, while the CSI 300 index, which tracks the biggest companies traded in Shanghai and Shenzhen, fell by 0.8% at the time of writing. |
In corporate news, British transport company FirstGroup is planning to sell off its Greyhound bus operator in the US as well as reviewing options for its UK bus arm. Future commitments to the British rail industry will also be dependent on the government’s attitude, it said, amid pressure from investors to ditch UK trains altogether. | |
And Watches of Switzerland, which sells what it says on the tin, priced an initial public offering at 270p. That would value Britain’s biggest watch-vendor at about £647m, while raising £220m. | And Watches of Switzerland, which sells what it says on the tin, priced an initial public offering at 270p. That would value Britain’s biggest watch-vendor at about £647m, while raising £220m. |
The agenda | The agenda |
8:30am BST: Speech by Bank of England’s Dave Ramsden | 8:30am BST: Speech by Bank of England’s Dave Ramsden |
1pm BST: Brazil GDP growth rate (first quarter) | 1pm BST: Brazil GDP growth rate (first quarter) |
1:30pm BST: US GDP growth rate second estimate (first quarter) |