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You can find the current article at its original source at https://www.theguardian.com/business/live/2019/jul/09/us-china-trade-war-basf-warning-markets-jerome-powell-philip-lane-business-live
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| Pound falls near two-year low; ECB vows more stimulus if needed - as it happened | |
| (32 minutes later) | |
| And finally, European stock markets have ended the day lower than they started it. | |
| Britain’s FTSE 100 only lost 12 points, or 0.17%, as the weak pound propped up the index by boosting major exporters. | |
| The smaller FTSE 250 index of medium-sized UK firms had a worse day, down 0.6%. | |
| Germany’s DAX lost almost 1%, with chemicals giant BASF losing over 3% following last night’s profits warning. BASF’s warnings about the impact of the US-China trade war hit other chemicals groups, and also industrial groups such as Thyssemkrupp (-4%). | |
| Shares in carmakers also dropped, following BASF’s gloomy assessment of the auto sector. This helped to knock the French CAC down by 0.3%. | |
| Goodnight. GW | |
| The pound remains under fire tonight, at its weakest level since January’s flash crash (and a two year low, if you ignore it). | |
| Sterling is still bobbing under the $1.25 mark, currently around $1.246 against the US dollar tonight. | |
| Brexit fears are a key factor, especially as MPs will not get the chance to block a no-deal crisis today: | |
| Speaker thwarts Dominic Grieve move against no-deal Brexit | |
| Fiona Cincotta of City Index says the tide of bad news is worrying the City. | |
| Recession concerns coupled with fears over Brexit are proving too much for pound traders to swallow. And who could blame them? The negative news keeps stacking up. | |
| Today the BRC revealed that retail sales slumped -1.6% year on year, confirming that any wage rise UK households are enjoying is not being reflected at the tills. Adding to the bad news a contraction in the UK economy is as good as confirmed for Q2, with analysts pencilling in a 0.1% decline in GDP, down from 0%. The outlook for Q3 is equally gloomy. | |
| Finally, the prospect a no deal Brexit is running high. The House Speaker Bercow preventing MP’s from voting on an amendment to stop the next PM from proroguing parliament for a no deal Brexit has done little for the prospect of avoiding a disorderly Brexit. In addition to the pound taking a hit, tourism stocks such as TUII, IAG and easyJet fell over 3% | |
| ECB chief economist Philip Lane has also denied that central banks pump up the markets...even though asset prices have done very nicely from years of stimulus. | ECB chief economist Philip Lane has also denied that central banks pump up the markets...even though asset prices have done very nicely from years of stimulus. |
| Lane: Our goal is not to make markets happy, but rather to provide favourable financing conditions that can stimulate the real economy and anchor inflation expectations #AskECB https://t.co/9xbmqiANqN | Lane: Our goal is not to make markets happy, but rather to provide favourable financing conditions that can stimulate the real economy and anchor inflation expectations #AskECB https://t.co/9xbmqiANqN |
| Oh, and he’s a football fan too: | Oh, and he’s a football fan too: |
| Lane: Definitely the liver bird #LiverpoolFC #youllneverwalkalone #LFC #AskECB https://t.co/1fIoWgEPG0 | Lane: Definitely the liver bird #LiverpoolFC #youllneverwalkalone #LFC #AskECB https://t.co/1fIoWgEPG0 |
| Lane is sticking strictly to the script in his Q&A, insisting that the ECB remains independent from political pressure.... | Lane is sticking strictly to the script in his Q&A, insisting that the ECB remains independent from political pressure.... |
| Lane: The ECB is, and will remain, fully independent and sets its policies in pursuit of its mandate of maintaining price stability #AskECB https://t.co/Nfaoe0EgPL | Lane: The ECB is, and will remain, fully independent and sets its policies in pursuit of its mandate of maintaining price stability #AskECB https://t.co/Nfaoe0EgPL |
| ... defending his (current) boss’s precious QE scheme.... | ... defending his (current) boss’s precious QE scheme.... |
| Lane: Our asset purchases have been very successful by lowering financing conditions for firms and households and have led to the creation of millions of new jobs over recent years. #AskECB https://t.co/ZTo73egcOu | Lane: Our asset purchases have been very successful by lowering financing conditions for firms and households and have led to the creation of millions of new jobs over recent years. #AskECB https://t.co/ZTo73egcOu |
| ...and declining to criticise his next boss either. | ...and declining to criticise his next boss either. |
| Lane: She is an excellent choice for the ECB. I am very much looking forward to working with her. #AskECB https://t.co/m23AIXM3qF | Lane: She is an excellent choice for the ECB. I am very much looking forward to working with her. #AskECB https://t.co/m23AIXM3qF |
| On cryptocurrencies, the ECB is keen not to give investment advice -- bitcoin fans are on their own! | On cryptocurrencies, the ECB is keen not to give investment advice -- bitcoin fans are on their own! |
| Lane: We are not here to give investment advice – remember, you invest at your own risk. By the way, it is a high hurdle for a crypto-asset to satisfy the definition of a currency. More in our explainer https://t.co/lxCIuhzlZH #AskECB https://t.co/zu5x9HKdmZ | Lane: We are not here to give investment advice – remember, you invest at your own risk. By the way, it is a high hurdle for a crypto-asset to satisfy the definition of a currency. More in our explainer https://t.co/lxCIuhzlZH #AskECB https://t.co/zu5x9HKdmZ |
| Lane: Benoît Cœuré, my colleague on the ECB’s Executive Board, leads the G7 working group on stablecoins. The group will present its initial findings on 17 July #AskECB https://t.co/b3Fyp840wn | Lane: Benoît Cœuré, my colleague on the ECB’s Executive Board, leads the G7 working group on stablecoins. The group will present its initial findings on 17 July #AskECB https://t.co/b3Fyp840wn |
| Despite the sharp slowdown in Europe, the ECB reckons the eurozone isn’t going into recession. | Despite the sharp slowdown in Europe, the ECB reckons the eurozone isn’t going into recession. |
| Lane: We do not see a recession, although the prolongation of uncertainties is weighing on our growth outlook #AskECB https://t.co/m59Y0x1e6X | Lane: We do not see a recession, although the prolongation of uncertainties is weighing on our growth outlook #AskECB https://t.co/m59Y0x1e6X |
| ECB chief economist Philip Lane says the central bank is ready to take action to stimulate growth and inflation if needed. | ECB chief economist Philip Lane says the central bank is ready to take action to stimulate growth and inflation if needed. |
| Lans says he and his colleagues have the tools they need, and are keeping a close eye on the economy. Currently there are “downside risks” to growth, he adds. | Lans says he and his colleagues have the tools they need, and are keeping a close eye on the economy. Currently there are “downside risks” to growth, he adds. |
| That’s very much in the spirit of Mario Draghi, who steps down from the ECB this autumn, | That’s very much in the spirit of Mario Draghi, who steps down from the ECB this autumn, |
| Lane: We meet every six weeks to discuss monetary policy and take decisions. We continuously assess the state of the economy and stand ready to act to keep inflation on a path to our aim #AskECB https://t.co/z92DQCG28o | Lane: We meet every six weeks to discuss monetary policy and take decisions. We continuously assess the state of the economy and stand ready to act to keep inflation on a path to our aim #AskECB https://t.co/z92DQCG28o |
| Lane: While the euro area is doing well along some dimensions, inflation remains below target and there are downside risks to the growth outlook. Substantial accommodation is still required to bring inflation back to aim. If more easing is needed, we have the tools #AskECB https://t.co/rdnMJD3T7p | Lane: While the euro area is doing well along some dimensions, inflation remains below target and there are downside risks to the growth outlook. Substantial accommodation is still required to bring inflation back to aim. If more easing is needed, we have the tools #AskECB https://t.co/rdnMJD3T7p |
| Heads-up. Philip Lane, the European Central Bank’s new chief economist, is holding an online Q&A right now. | Heads-up. Philip Lane, the European Central Bank’s new chief economist, is holding an online Q&A right now. |
| It’s your chance to ask about the eurozone economy, whether a fresh stimulus programme is needed, and Lane’s views on issues such as cryptocurrencies, trade wars, Brexit etc. | It’s your chance to ask about the eurozone economy, whether a fresh stimulus programme is needed, and Lane’s views on issues such as cryptocurrencies, trade wars, Brexit etc. |
| Perhaps Christine Lagarde’s nomination to replace Mario Draghi as head of the ECB could also come up..... | Perhaps Christine Lagarde’s nomination to replace Mario Draghi as head of the ECB could also come up..... |
| Good afternoon, this is Philip R. Lane. I joined the ECB as Chief Economist on 1 June. I’m here to answer your questions for the next 45 minutes. Please use #AskECB to join the conversation. pic.twitter.com/GeqaBfKryA | Good afternoon, this is Philip R. Lane. I joined the ECB as Chief Economist on 1 June. I’m here to answer your questions for the next 45 minutes. Please use #AskECB to join the conversation. pic.twitter.com/GeqaBfKryA |
| The US stock market has dipped at the open, following the small losses in Europe this morning. | The US stock market has dipped at the open, following the small losses in Europe this morning. |
| The Dow Jones industrial average has dropped by 104 points, or -0.4%, to 26,701 in early trading. | The Dow Jones industrial average has dropped by 104 points, or -0.4%, to 26,701 in early trading. |
| Dow skids 100 points lower at the open as stocks head south for 3rd straight day ahead of Powell testimony https://t.co/jkwrU6wy4W pic.twitter.com/VYB7xTPJpS | Dow skids 100 points lower at the open as stocks head south for 3rd straight day ahead of Powell testimony https://t.co/jkwrU6wy4W pic.twitter.com/VYB7xTPJpS |
| Neil Wilson of Markets.com says investors are anxious about two things. | Neil Wilson of Markets.com says investors are anxious about two things. |
| 1) Are company profits softening? That’s a key risk following the profit warning from chemicals giant BASF (see opening post). | 1) Are company profits softening? That’s a key risk following the profit warning from chemicals giant BASF (see opening post). |
| 2) Will the Federal Reserve actually cut interest rates soon, as expected, to support the economy? We’ll get more clues tomorrow when Fed chair Powell testifies to Congress. | 2) Will the Federal Reserve actually cut interest rates soon, as expected, to support the economy? We’ll get more clues tomorrow when Fed chair Powell testifies to Congress. |
| He explains: | He explains: |
| Markets remain nervous about the Fed and with earnings season around the corner. In particular, there may just be a growing realisation that the market has banked on the Fed turning more dovish than it is inclined to right now. | Markets remain nervous about the Fed and with earnings season around the corner. In particular, there may just be a growing realisation that the market has banked on the Fed turning more dovish than it is inclined to right now. |
| Equity markets are pricing in a lot of good news, and precious little of the bad. As we approach earnings season, revisions to corporate profit guidance could undermine the positivity we are witnessing in global equity markets right now. | Equity markets are pricing in a lot of good news, and precious little of the bad. As we approach earnings season, revisions to corporate profit guidance could undermine the positivity we are witnessing in global equity markets right now. |
| The market is so fixated on the Fed put, and buying into this, that they may be blind to the drop in corporate profits. The problem for bulls from here is that several rate cuts by the Fed are already priced in, meaning, in the absence of a material rerating of valuations, we would need to see an improvement in earnings to push equities higher still. | The market is so fixated on the Fed put, and buying into this, that they may be blind to the drop in corporate profits. The problem for bulls from here is that several rate cuts by the Fed are already priced in, meaning, in the absence of a material rerating of valuations, we would need to see an improvement in earnings to push equities higher still. |
| Speaking of Jerome Powell.... one of Donald Trump’s top advisors has denied that the Fed chair’s job is at risk. | Speaking of Jerome Powell.... one of Donald Trump’s top advisors has denied that the Fed chair’s job is at risk. |
| White House National Economic Council Director Larry Kudlow insisted today that Powell’s job is “safe” and “there is no effort to remove him.” | White House National Economic Council Director Larry Kudlow insisted today that Powell’s job is “safe” and “there is no effort to remove him.” |
| Fed Chair Jay Powell's job is safe, says Larry Kudlow"There is no effort to remove him. I will say that unequivocally at the present time. Yes, he's safe" - Kudlow pic.twitter.com/IWcrsjjWre | Fed Chair Jay Powell's job is safe, says Larry Kudlow"There is no effort to remove him. I will say that unequivocally at the present time. Yes, he's safe" - Kudlow pic.twitter.com/IWcrsjjWre |
| That’s despite a torrent of criticism from Trump recently, blasting the Fed for not cutting interest rates. | That’s despite a torrent of criticism from Trump recently, blasting the Fed for not cutting interest rates. |
| BlackRock’s Rupert Harrison has been expanding on his concerns about sterling, in this exchange with Reuters’ David Milliken. | BlackRock’s Rupert Harrison has been expanding on his concerns about sterling, in this exchange with Reuters’ David Milliken. |
| Sterling within a whisker of January's 'flash crash' low, briefly below $1.2440 (next milestone: April 2017). Earlier today BlackRock's @rbrharrison was warning that FX markets underpriced risk of Brexit-related #GBP volatility over next 9-12 months pic.twitter.com/Y2Fjze67zn | Sterling within a whisker of January's 'flash crash' low, briefly below $1.2440 (next milestone: April 2017). Earlier today BlackRock's @rbrharrison was warning that FX markets underpriced risk of Brexit-related #GBP volatility over next 9-12 months pic.twitter.com/Y2Fjze67zn |
| Indeed. Volatility underpriced in both directions - probability of tail outcomes (no deal or no Brexit) has risen | Indeed. Volatility underpriced in both directions - probability of tail outcomes (no deal or no Brexit) has risen |
| Strange how market doesn't think sterling volatility is likely to be much greater than it was during late 1990s/early 2000s! pic.twitter.com/1Wb0hYDPQx | Strange how market doesn't think sterling volatility is likely to be much greater than it was during late 1990s/early 2000s! pic.twitter.com/1Wb0hYDPQx |
| I think a lot of people have given up trying to play sterling through options markets because it's so hard to call the direction. As a result vol is underpriced but that can reset very quickly | I think a lot of people have given up trying to play sterling through options markets because it's so hard to call the direction. As a result vol is underpriced but that can reset very quickly |
| Over in Washington, Federal Reserve chairman Jerome Powell has warned that the stress tests used to assess the nation’s largest banks need to evolve. | Over in Washington, Federal Reserve chairman Jerome Powell has warned that the stress tests used to assess the nation’s largest banks need to evolve. |
| Otherwise, Powell says, the fast-changing financial system could make them obsolete. More here. | Otherwise, Powell says, the fast-changing financial system could make them obsolete. More here. |
| Fed Chair Powell: Stress tests for banks put into place following economic meltdown are important, but must evolve. @AP @mcrutsinger reports. https://t.co/8vfkCcr2zp | Fed Chair Powell: Stress tests for banks put into place following economic meltdown are important, but must evolve. @AP @mcrutsinger reports. https://t.co/8vfkCcr2zp |
| Powell's point: stress tests must guard against complacency by banks and regulators. https://t.co/H9VEmsmc4d | Powell's point: stress tests must guard against complacency by banks and regulators. https://t.co/H9VEmsmc4d |