This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2019/jul/19/gold-price-six-year-high-rate-cuts-iranian-tensions-uk-public-finances-business-live

The article has changed 15 times. There is an RSS feed of changes available.

Version 13 Version 14
UK deficit rises; gold hits six-year high; Trump blasts Fed - business live UK deficit rises; gold hits six-year high; Trump blasts Fed - as it happened
(32 minutes later)
A quick recap
Britain’s budget deficit has widened, giving Britain’s next prime minister a headache before they even get to work.The UK had to borrow £7.2bn in June to cover the gap between spending and tax receipts, more than expected and more than twice as much as in June 2018.
Economists fear that Britain could miss its borrowing targets for the current financial year.
Donald Trump has renewed the pressure on the US Federal Reserve to cut interest rates this month. The US president blasted ‘faulty’ thinking at the Fed, and urged it to cut borrowing costs.
Hopes of an imminent US rate cut helped to drive the gold price to a six-year high today. An ounce of bullion hit $1,450 for the first time since 2013, with rising tensions in the Middle East also boosting demand for the metal.
Motoring groups have warned that UK drivers face an expensive summer, after petrol prices hit their highest for any July in five years.
Stocks have fallen in Italy, on fears that Rome’s government could be on the brink of collapse.
US consumers don’t appear to share Donald Trump’s concerns about interest rates.US consumers don’t appear to share Donald Trump’s concerns about interest rates.
The University of Michigan’s monthly survey of consumer sentiment has shown a small increase, to 98.4 from 98.2 last month. That’s close to a 10-year high.The University of Michigan’s monthly survey of consumer sentiment has shown a small increase, to 98.4 from 98.2 last month. That’s close to a 10-year high.
Americans reported that they were more optimistic about their financial prospects -- perhaps thanks to recent stock market gains, and hopes of a US-China trade war deal.Americans reported that they were more optimistic about their financial prospects -- perhaps thanks to recent stock market gains, and hopes of a US-China trade war deal.
#UnitedStates Michigan Consumer Sentiment Prel at 98.4 https://t.co/CYGdEmm87g pic.twitter.com/mJw2QB3XBP#UnitedStates Michigan Consumer Sentiment Prel at 98.4 https://t.co/CYGdEmm87g pic.twitter.com/mJw2QB3XBP
What does Donald Trump mean when he says he preferred New York Fed President John Williams’ “first statement much better than his second”?What does Donald Trump mean when he says he preferred New York Fed President John Williams’ “first statement much better than his second”?
Well, Williams caused excitement yesterday when he outlined the virtue of pro-active, early, interest rate cuts - rather than waiting for problems to develop.Well, Williams caused excitement yesterday when he outlined the virtue of pro-active, early, interest rate cuts - rather than waiting for problems to develop.
By comparing a rate cut to a vaccination jab sparked excitement among investors, and speculation that he could be backing a large cut to borrowing costs.By comparing a rate cut to a vaccination jab sparked excitement among investors, and speculation that he could be backing a large cut to borrowing costs.
But this prompted the New York Fed to issue a clarification to its leaders’ speech, insisting that he wasn’t trying to guide the market (to Trump’s obvious disappointment).But this prompted the New York Fed to issue a clarification to its leaders’ speech, insisting that he wasn’t trying to guide the market (to Trump’s obvious disappointment).
They said:They said:
“This was an academic speech on 20 years of research. It was not about potential policy actions at the upcoming FOMC meeting.”“This was an academic speech on 20 years of research. It was not about potential policy actions at the upcoming FOMC meeting.”
Another day, another attack on the US central bank from the White House.Another day, another attack on the US central bank from the White House.
Central bank independence looks ancient history, as president Trump argues that US interest rates should be a LOT lower.Central bank independence looks ancient history, as president Trump argues that US interest rates should be a LOT lower.
Because of the faulty thought process we have going for us at the Federal Reserve, we pay much higher interest rates than countries that are no match for us economically. In other words, our interest costs are much higher than other countries, when they should be lower. Correct!Because of the faulty thought process we have going for us at the Federal Reserve, we pay much higher interest rates than countries that are no match for us economically. In other words, our interest costs are much higher than other countries, when they should be lower. Correct!
I like New York Fed President John Williams first statement much better than his second. His first statement is 100% correct in that the Fed “raised” far too fast & too early. Also must stop with the crazy quantitative tightening. We are in a World competition, & winning big,...I like New York Fed President John Williams first statement much better than his second. His first statement is 100% correct in that the Fed “raised” far too fast & too early. Also must stop with the crazy quantitative tightening. We are in a World competition, & winning big,...
....but it is no thanks to the Federal Reserve. Had they not acted so fast and “so much,” we would be doing even better than we are doing right now. This is our chance to build unparalleled wealth and success for the U.S., GROWTH, which would greatly reduce % debt. Don’t blow it!....but it is no thanks to the Federal Reserve. Had they not acted so fast and “so much,” we would be doing even better than we are doing right now. This is our chance to build unparalleled wealth and success for the U.S., GROWTH, which would greatly reduce % debt. Don’t blow it!
....Fed: There is almost no inflation!....Fed: There is almost no inflation!
Retail news: a private equity firm has bought a controlling stake in department store Liberty London, in a deal valuing the landmark at £300m.Retail news: a private equity firm has bought a controlling stake in department store Liberty London, in a deal valuing the landmark at £300m.
More here:More here:
Liberty store sold for £300m to private equity groupLiberty store sold for £300m to private equity group
We mentioned this morning that gold has hit a six-year high, but it’s actually an EIGHT year high once you priced it in sterling rather than dollars.We mentioned this morning that gold has hit a six-year high, but it’s actually an EIGHT year high once you priced it in sterling rather than dollars.
That’s because of the pound’s recent weakness following the EU referendum.That’s because of the pound’s recent weakness following the EU referendum.
Adrian Ash, director of research at online and mobile-app trading platform BullionVault, explains:Adrian Ash, director of research at online and mobile-app trading platform BullionVault, explains:
“Rising debt and falling interest rates are conspiring with the UK’s Brexit mess to push down Sterling as gold sets multi-year highs.“Rising debt and falling interest rates are conspiring with the UK’s Brexit mess to push down Sterling as gold sets multi-year highs.
“The last and only other time gold traded this high for UK savers was summer 2011, when the global financial crisis peaked with the near-collapse of the Euro and the worst rioting across England in modern times.”“The last and only other time gold traded this high for UK savers was summer 2011, when the global financial crisis peaked with the near-collapse of the Euro and the worst rioting across England in modern times.”
Shares in Microsoft have hit a record high, after it reported strong revenue growth from cloud computing services and its Surface laptop business.Shares in Microsoft have hit a record high, after it reported strong revenue growth from cloud computing services and its Surface laptop business.
Over in New York, stocks are rising at the start of trading as investors anticipate US interest rate cuts soon.Over in New York, stocks are rising at the start of trading as investors anticipate US interest rate cuts soon.
The Dow Jones industrial average has gained 110 points, or 0.4%, to 27,333, while the S&P 500 has gained 0.35% to 3,005 -- close to this week’s record highs.The Dow Jones industrial average has gained 110 points, or 0.4%, to 27,333, while the S&P 500 has gained 0.35% to 3,005 -- close to this week’s record highs.
St. Louis Federal Reserve president James Bullard has boosted stocks, by saying that a 0.25% cut in US interest rates this month would be appropriate.St. Louis Federal Reserve president James Bullard has boosted stocks, by saying that a 0.25% cut in US interest rates this month would be appropriate.
#BREAKING: SPX Futures Cimb Above 3,000 As Fed’s Bullard In Agreement Of A 25 bps rate cut in July pic.twitter.com/5t3seEktej#BREAKING: SPX Futures Cimb Above 3,000 As Fed’s Bullard In Agreement Of A 25 bps rate cut in July pic.twitter.com/5t3seEktej
U.S. stocks rise at the openhttps://t.co/wVdoMCQtf4 pic.twitter.com/ZZ68pYUCsUU.S. stocks rise at the openhttps://t.co/wVdoMCQtf4 pic.twitter.com/ZZ68pYUCsU
As if the weak pound was enough trouble, families are also facing higher petrol costs .As if the weak pound was enough trouble, families are also facing higher petrol costs .
The AA reports that fuel prices hit 128.72p a litre in July, while diesel cost 131.61p on average. That’s the highest for any July in five years.The AA reports that fuel prices hit 128.72p a litre in July, while diesel cost 131.61p on average. That’s the highest for any July in five years.
That will drive up the cost of a UK staycation, if people face a long drive to and from their summer getaway.That will drive up the cost of a UK staycation, if people face a long drive to and from their summer getaway.
Infuriatingly for drivers, wholesale energy costs have actually fallen over the last few months. Brent crude was $75/barrel in April, but just $63/barrel this week.Infuriatingly for drivers, wholesale energy costs have actually fallen over the last few months. Brent crude was $75/barrel in April, but just $63/barrel this week.
However, import costs have risen, due to the pound hitting a 27-month low against the US dollar.However, import costs have risen, due to the pound hitting a 27-month low against the US dollar.
The AA’s Luke Bosdet says:The AA’s Luke Bosdet says:
“The tragedy with soaring summer pump prices is not only hard-earned holidaymakers’ money disappearing at the pump but the loss of income for the tourism industry.“The tragedy with soaring summer pump prices is not only hard-earned holidaymakers’ money disappearing at the pump but the loss of income for the tourism industry.
“If every car that heads to the South West, Wales, the Lake District, Scotland or other UK holiday destinations pays an extra £7 a tank for fuel compared to two years ago, that is many millions of pounds not being spent in places where a good tourist season is make or break for those communities.”“If every car that heads to the South West, Wales, the Lake District, Scotland or other UK holiday destinations pays an extra £7 a tank for fuel compared to two years ago, that is many millions of pounds not being spent in places where a good tourist season is make or break for those communities.”
On the other hand, climate activists might welcome anything that keeps cars off the road - or encourages a move to electric.On the other hand, climate activists might welcome anything that keeps cars off the road - or encourages a move to electric.
Our economics editor, Larry Elliott, says June’s public finances in June show the scale of the challenge facing Boris Johnson or Jeremy Hunt:Our economics editor, Larry Elliott, says June’s public finances in June show the scale of the challenge facing Boris Johnson or Jeremy Hunt:
Pledges by Boris Johnson and Jeremy Hunt to cut taxes and increase spending have come just as the UK’s public finances have shown a marked deterioration, according to the latest official figures.Pledges by Boris Johnson and Jeremy Hunt to cut taxes and increase spending have come just as the UK’s public finances have shown a marked deterioration, according to the latest official figures.
In what analysts called a “reality check” for the two Conservative prime ministerial contenders, the Office for National Statistics said the government needed to borrow £7.2bn last month – more than double the £3.3bn in the same month a year ago.In what analysts called a “reality check” for the two Conservative prime ministerial contenders, the Office for National Statistics said the government needed to borrow £7.2bn last month – more than double the £3.3bn in the same month a year ago.
Higher spending and lower tax receipts were responsible for the highest June deficit – the gap between government income and spending – in four years, amid signs that the economic slowdown is starting to feed through into the public finances.Higher spending and lower tax receipts were responsible for the highest June deficit – the gap between government income and spending – in four years, amid signs that the economic slowdown is starting to feed through into the public finances.
Hunt and Johnson have promised big cuts in corporate and personal taxes while campaigning to succeed Theresa May, prompting a warning from the independent Office for Budget Responsibility on Thursday that there was no fiscal “free lunch”. The OBR warned that the contenders’ proposals were uncosted and would be likely to raise government borrowing by tens of billions of pounds.Hunt and Johnson have promised big cuts in corporate and personal taxes while campaigning to succeed Theresa May, prompting a warning from the independent Office for Budget Responsibility on Thursday that there was no fiscal “free lunch”. The OBR warned that the contenders’ proposals were uncosted and would be likely to raise government borrowing by tens of billions of pounds.
More here:More here:
Worsening public finances give next PM a sharp 'reality check'Worsening public finances give next PM a sharp 'reality check'
2019 has been a strong year for stock markets so far, with Wall Street up 20%, Britain’s FTSE 100 gaining 11% and China’s CSI 300 rallying by 17%.2019 has been a strong year for stock markets so far, with Wall Street up 20%, Britain’s FTSE 100 gaining 11% and China’s CSI 300 rallying by 17%.
But we’re now entering the summer lull, and analysts are wondering if a correction is close.But we’re now entering the summer lull, and analysts are wondering if a correction is close.
Mike Wilson, chief investment officer of Morgan Stanley, believes stocks could soon shed 10% of their value in the next few months, telling Marketwatch:Mike Wilson, chief investment officer of Morgan Stanley, believes stocks could soon shed 10% of their value in the next few months, telling Marketwatch:
“We’re not looking for the bottom to fallout like last year, but I do expect a 10% correction in the next three months,”“We’re not looking for the bottom to fallout like last year, but I do expect a 10% correction in the next three months,”
He argues that earnings estimates are too frothy, and may come down over the summer - very plausible, if the world economy loses momentum.He argues that earnings estimates are too frothy, and may come down over the summer - very plausible, if the world economy loses momentum.
It also appears that a US interest rate cut is rather ‘priced in’ to valuations, so traders could take profits when it actually happens.It also appears that a US interest rate cut is rather ‘priced in’ to valuations, so traders could take profits when it actually happens.
Wilson says:Wilson says:
“We think there’s still some unfinished business and it’s not going to be scary, but it will be a better opportunity to buy stocks over the next three to six months, and maybe 18 months. We tell people don’t chase break outs when everyone is getting excited.”“We think there’s still some unfinished business and it’s not going to be scary, but it will be a better opportunity to buy stocks over the next three to six months, and maybe 18 months. We tell people don’t chase break outs when everyone is getting excited.”
Need to Know: Morgan Stanley investment chief warns of oncoming 10% correction https://t.co/4lUK2c9DbzNeed to Know: Morgan Stanley investment chief warns of oncoming 10% correction https://t.co/4lUK2c9Dbz
Over in Milan, stocks are sliding as investor worry that Italy’s coalition government could collapse. Tensions have been growing for weeks between the right-wing League party, and the anti-establishment Movement Five Star. Now, League leader Matteo Salvini (Italy’s deputy PM) has criticised his coalition partners, revealing he will meet M5S’s Luigi Di Maio soon.Over in Milan, stocks are sliding as investor worry that Italy’s coalition government could collapse. Tensions have been growing for weeks between the right-wing League party, and the anti-establishment Movement Five Star. Now, League leader Matteo Salvini (Italy’s deputy PM) has criticised his coalition partners, revealing he will meet M5S’s Luigi Di Maio soon.
Salvini is unhappy that M5S are blocking certain government policies, saying:Salvini is unhappy that M5S are blocking certain government policies, saying:
“We will certainly meet ... the problem is not Di Maio, but opposition coming from many 5-Star politicians.“We will certainly meet ... the problem is not Di Maio, but opposition coming from many 5-Star politicians.
“There is an obvious and total block on proposals, initiatives, projects and infrastructure by some 5-Star ministers that hurts Italy.“There is an obvious and total block on proposals, initiatives, projects and infrastructure by some 5-Star ministers that hurts Italy.
Salvini’s attacks on migration, and his decision to block migrant rescue ships from docking at Italian ports, have also angered M5S politicians.Salvini’s attacks on migration, and his decision to block migrant rescue ships from docking at Italian ports, have also angered M5S politicians.
Opinions poll show that the League are leading the polls -- which might encourage Salvani to push for an election....Opinions poll show that the League are leading the polls -- which might encourage Salvani to push for an election....
State of play in #Italy politics - Salvini's Lega started as junior partner in coalition with Five Star Movement - now Lega tops polls ahead of likely snap election pic.twitter.com/rzm0hH9eMtState of play in #Italy politics - Salvini's Lega started as junior partner in coalition with Five Star Movement - now Lega tops polls ahead of likely snap election pic.twitter.com/rzm0hH9eMt
Italy’s FTSE MIB has lost 1% today, with bank shares down 2.5%.Italy’s FTSE MIB has lost 1% today, with bank shares down 2.5%.
Here’s our news story on how gold had been boosted by tensions in the Gulf, and the prospect of interest rate cuts:Here’s our news story on how gold had been boosted by tensions in the Gulf, and the prospect of interest rate cuts:
Gold price hits six-year high as investors await US interest rate cutGold price hits six-year high as investors await US interest rate cut
The jump in UK borrowing casts a shadow over the coronation of the next Conservative Party leader next week.The jump in UK borrowing casts a shadow over the coronation of the next Conservative Party leader next week.
Howard Archer of the EY Item Club says the swelling deficit is “hardly the best backdrop” to the race to Downing Street.Howard Archer of the EY Item Club says the swelling deficit is “hardly the best backdrop” to the race to Downing Street.
Both Boris Johnson and Jeremy Hunt have made expensive pledges in their battle for votes (which chancellor Philip Hammond say are impossible under a no-deal Brexit....)Both Boris Johnson and Jeremy Hunt have made expensive pledges in their battle for votes (which chancellor Philip Hammond say are impossible under a no-deal Brexit....)
Do spending plans of Boris Johnson and Jeremy Hunt add up?Do spending plans of Boris Johnson and Jeremy Hunt add up?
He says:He says:
Disappointing news on the public finances to greet the new Prime Minister and Chancellor when they shortly take office with the June shortfall on the budget deficit more than doubling year-on-year.Disappointing news on the public finances to greet the new Prime Minister and Chancellor when they shortly take office with the June shortfall on the budget deficit more than doubling year-on-year.
Furthermore June meant that the public finances have seen year-on-year deterioration through the first three months of fiscal year 2019/20.Furthermore June meant that the public finances have seen year-on-year deterioration through the first three months of fiscal year 2019/20.
Archer adds that it’s too early to say definitively whether the UK will hit, or miss, it’s budget target this year.Archer adds that it’s too early to say definitively whether the UK will hit, or miss, it’s budget target this year.
Much will depend on whether the economy can shrug off its current weakness as well as on Brexit developments. It will also be influenced by any changes to fiscal policy by the new Prime Minister and Chancellor.Much will depend on whether the economy can shrug off its current weakness as well as on Brexit developments. It will also be influenced by any changes to fiscal policy by the new Prime Minister and Chancellor.
Bloomberg’s Jill Ward points out that the cost of servicing Britain’s national debt rose in June -- helping to push the deficit higher.Bloomberg’s Jill Ward points out that the cost of servicing Britain’s national debt rose in June -- helping to push the deficit higher.
Spending including capital investment rose 7.2%, boosted by debt interest costs -- higher RPI pushed up payments on inflation-linked bonds -- and government outlays on goods and services.Spending including capital investment rose 7.2%, boosted by debt interest costs -- higher RPI pushed up payments on inflation-linked bonds -- and government outlays on goods and services.
Receipts rose 1.5%, with dividends and national-insurance contributions driving the increase. Excluding these categories, tax income was virtually unchanged.Receipts rose 1.5%, with dividends and national-insurance contributions driving the increase. Excluding these categories, tax income was virtually unchanged.
Britain posts its largest June budget deficit in four years as spending surged and taxes failed to grow https://t.co/xvas4ebsynBritain posts its largest June budget deficit in four years as spending surged and taxes failed to grow https://t.co/xvas4ebsyn
A no-deal Brexit crisis would make the UK public finances look even worse, points out Mike Jakeman, senior economist at PwC:A no-deal Brexit crisis would make the UK public finances look even worse, points out Mike Jakeman, senior economist at PwC:
There remains an unusual amount of uncertainty around the short-term future of the public finances at present. A no-deal Brexit would hit both government revenue (through lower tax receipts) and expenditure (through the need for fiscal stimulus package). The government would be likely to have to reconsider its medium-term targets for the deficit and debt.There remains an unusual amount of uncertainty around the short-term future of the public finances at present. A no-deal Brexit would hit both government revenue (through lower tax receipts) and expenditure (through the need for fiscal stimulus package). The government would be likely to have to reconsider its medium-term targets for the deficit and debt.
But even if a no-deal Brexit is avoided, a new chancellor is likely to bring new priorities and, with a spending review on the horizon, could sanction a period of looser fiscal policy.”But even if a no-deal Brexit is avoided, a new chancellor is likely to bring new priorities and, with a spending review on the horizon, could sanction a period of looser fiscal policy.”
Britain’s public finances appear to be ‘heading off track’, warns Ruth Gregory of Capital Economics.Britain’s public finances appear to be ‘heading off track’, warns Ruth Gregory of Capital Economics.
She says the jump in borrowing last month, from £3.3bn to £7.2nbn, shows that Britain is set to miss its borrowing targets for the 2019-20 financial.She says the jump in borrowing last month, from £3.3bn to £7.2nbn, shows that Britain is set to miss its borrowing targets for the 2019-20 financial.
That will leave Boris Johnson or Jeremy Hunt with less wriggle-room to fund some of their campaign promises, such as tax cuts or public sector pay increases -- unless they rip up the government’s borrowing targets.That will leave Boris Johnson or Jeremy Hunt with less wriggle-room to fund some of their campaign promises, such as tax cuts or public sector pay increases -- unless they rip up the government’s borrowing targets.
Gregory explains:Gregory explains:
June’s public finance figures continued the underlying deterioration in the fiscal position evident since the beginning of the financial year, providing a timely reminder that the new PM won’t get a free “fiscal lunch”....June’s public finance figures continued the underlying deterioration in the fiscal position evident since the beginning of the financial year, providing a timely reminder that the new PM won’t get a free “fiscal lunch”....
There will be further bad news for the new PM in September as a change in the accounting treatment of student loans in September will raise the deficit by more than £10bn a year.There will be further bad news for the new PM in September as a change in the accounting treatment of student loans in September will raise the deficit by more than £10bn a year.
However, this might not stop the new PM from loosening fiscal policy, she adds.However, this might not stop the new PM from loosening fiscal policy, she adds.
Economist Rupert Seggins shows how government spending has outpaced the tax take this financial year:Economist Rupert Seggins shows how government spending has outpaced the tax take this financial year:
UK public setor borrowing up £4.5bn to £17.9bn in the 3 months to June. Appears mainly down to increased spending on purchases of goods & services (+£3.2bn), interest payments (+£1.8bn) & staff costs (+1.3bn) meaning overall spending outstripped a £4.9bn increase in receipts. pic.twitter.com/G9OB3ODd6OUK public setor borrowing up £4.5bn to £17.9bn in the 3 months to June. Appears mainly down to increased spending on purchases of goods & services (+£3.2bn), interest payments (+£1.8bn) & staff costs (+1.3bn) meaning overall spending outstripped a £4.9bn increase in receipts. pic.twitter.com/G9OB3ODd6O
Growth in total central government receipts has slowed this financial year, from 4.5% to 2.9%. Largely down to the lower contributions from VAT (1.7% to 0.8%) & corporation tax (0.8% to 0%). pic.twitter.com/3X7cv2QCO9Growth in total central government receipts has slowed this financial year, from 4.5% to 2.9%. Largely down to the lower contributions from VAT (1.7% to 0.8%) & corporation tax (0.8% to 0%). pic.twitter.com/3X7cv2QCO9