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Markets edgy as investors await Jerome Powell's keynote speech – business live
Trump orders US companies to 'come home' from China – as it happened
(about 3 hours later)
We have confirmation of the trade action hinted at by the Global Times editor earlier: China will impose tariffs on American exports worth about $75bn.
What an eventful end to this bank holiday Friday. Here’s a reminder of the global events we covered off today:
China’s ministry of commerce said it will impose levies of 5% and 10% on more than 5,000 products originating in the US, with crude oil, small aircraft and cars among the items targeted, Reuters reported.
The US toy company behind My Little Pony and Play-Doh has agreed to buy Peppa Pig for £3.3bn in the the latest foreign takeover of a much-loved British brand for a bargain price following the collapse in the value of the pound over fears of a no-deal Brexit. The sale of Peppa Pig’s owner Entertainment One to America’s Hasbro brings the total value of UK companies to fall into overseas hands in the last two months to more than £25bn
Some of the tariffs will take effect on 1 September, with the rest on 15 December.
China will impose tariffs on American exports worth about $75bn. China’s ministry of commerce said it will impose levies of 5% and 10% on more than 5,000 products originating in the US, with crude oil, small aircraft and cars among the items targeted, Reuters reported. Some of the tariffs will take effect on 1 September, with the rest on 15 December
...and for those who drink at lunch on a Friday, here’s a great dispatch from the G7 in Biarritz, where a tariff on French wine could be in the offing after Emmanuel Macron targeted US tech firms with new levies.
Fed chair Jerome Powell spoke at the Jackson Hole Symposium, but the much-anticipated was overshadowed by fresh blows in the US-China trade war. The US central bank boss said the US economy was still performing well and pledged to remain “vigilant” around risks to financial stability. He also stressed that while trade uncertainty was weighing on global growth, foreign trade policies are ultimately outside of the Fed’s remit
French wine-makers are increasingly concerned about Donald Trump’s threats to introduce high tariffs on French wine in retaliation for Emmanuel Macron’s tax on global technology giants, writes the Guardian’s Angelique Chrisafis.
Trump quickly hit out at Powell for saying “nothing” in his speech and compared the US Fed boss to China’s leader Xi Jinping, asking which figure was a bigger enemy
Trump is a proud teetotaller, but he recently told reporters he had “always liked American wines better than French wines even though I don’t drink”. He explained why: “I just like the way they look.”
Not to be outdone by Beijing’s fresh tariffs, Trump went on a Twitter tirade and ordered US companies to come home from China, sending US shares into the red
Perhaps you’ve already had your lunch, but if not here’s more to whet your appetite: the prospect of vegan doughnuts on a high street near you.
Have a great long weekend. We’ll be back on Tuesday.
Here’s the full story on the Greggs revelation that it is working on even more vegan products:
US stock markets are back in the red after Trump’s tweets:
Greggs to develop vegan versions of all its bestselling foods
S&P 500 -0.69%
But here is a good illustration of the challenge facing Powell as he tries to balance supporting the economy with his desire not to raise rates prematurely: a strong suggestion that China is intending to retaliate to US tariffs.
Dow -0.56%
China will “take further countermeasures” in the trade war, including retailiatory tariffs, after the US imposed levies on goods worth $300bn, according to Hu Xijin, the editor of China’s Global Times, a state-controlled newspaper.
Nasdaq Composite -0.82%
The $300bn tariffs caused markets to panic at the start of the month, after the shock decision from Donald Trump, the US president.
Our colleague Dominic Rushe has full coverage of Powell’s speech at Jackson Hole
China has ammunition to fight back. The US side will feel the pain.
Not to be outdone by Beijing, Trump is now apparently ordering US companies to come home from China.
Based on what I know, China will take further countermeasures in response to US tariffs on $300 billion Chinese goods. Beijing will soon unveil a plan of imposing retaliatory tariffs on certain US products. China has ammunition to fight back. The US side will feel the pain.
He insists the US would be “better off without” China, full stop:
There has also been some hawkish language from US rate-setters, which might suggest the Federal Reserve does not want to cut rates too quickly.
....better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..
More from Deutsche Bank:
....all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop - it didn’t. Our Economy, because of our gains in the last 2 1/2 years, is MUCH larger than that of China. We will keep it that way!
Fed officials already descended on Jackson Hole yesterday, and we got an interesting trickle of comments from some regional presidents. Overall, the tone was on the hawkish side of expectations.
Steen Jakobsen, chief economist at Saxo Bank, says Powell’s speech has a something for everyone:
Kansas City’s George said that she is not ready to provide more policy accommodation, Dallas’s Kaplan said “I’d like to avoid having to take further action,” and Philadelphia’s Harker said “I think we should stay here for a while and see how things play out.” And yes, he was talking about interest rates, not the beautiful resort in Wyoming.
Fed’s Chairman Powell delivers something for both doves & Fed feels trade and safety dictates an outlook which is ok but worsening https://t.co/LvUNBMbVMKChina changed the dynamics of event risk. September 1st now CRITICAL date. Observe USDCNH for indication of risk on/risk off pic.twitter.com/odY9nGro1f
Powell certainly appears to be getting into the swing of things at the Jackson Hole resort. Just look at those relaxed zip-off trousers from the central bank chief last night. Not sure what message that sends on monetary policy.
The war of words between the White House and Fed continues. And even if it’s more subtlety worded on the Fed’s side, analysts say Powell is holding his own:
Markets were this morning pricing in 57 basis points (0.5 percentage points) of cuts this year and another 47bps in 2020, meaning Powell has a high bar for markets to read a dovish message into today’s comments.
Powell condensed:The nut in the White House means we can't do our job properly. Anything could happen. Bye.
The last month has seen new trade war tensions, global growth slowdown fears and further steep drops in bond yields, so Powell’s speech “couldn’t come soon enough”, said analysts at Deutsche Bank led by Craig Nicol.
Shepherdson, chief economist at Pantheon Macroeconomics, adds:
Recession concerns are “crystalising today”, as evidenced by the inverted yield curve, Nicol said.
Fed Chair Powell is rather more diplomatic in his language than the president - a low bar, admittedly - but it is clear from his speech that the single biggest factor driving both market volatility, the actual global slowdown, and fears of a U.S. slowdown, is trade policy, both its current stance and uncertainty about the future.
The immediate focus of Powell’s speech will likely be whether he affirms that the current easing is a ‘mid-cycle adjustment’ as per the FOMC minutes or align more closely to market pricing.
After a long discussion of how the Fed arrived at its current policy framework, Mr. Powell stuck the knife in, pointing out that “fitting trade policy uncertainty into this framework is a new challenge… [there are] no recent precedents to guide any policy response to the current situation… Moreover, while monetary policy is a powerful tool that works to support consumer spending, business investment, and public confidence, it cannot provide a settled rulebook for international trade.”
The Deutsche Bank view is:
In other words, the Fed has been handicapped by Mr. Trump’s damaging and capricious trade policy, which has made it very hard for monetary policymakers to take a settled view of where the economy is headed.
If Powell sticks to the old language, as is most likely, it would affirm that he is still confident that the strength of consumption, in combination with modest Fed easing, will be sufficient to keep the recovery broadly on track.
Donald Trump has come out swinging after Powell’s speech failed to signal that it will bow to presidential pressure to cut interest rates further.
That would represent a slightly more hawkish message than markets are currently pricing, they reckon.
....My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?
So what will Powell do?
The US Fed boss added that the July interest rate cut – which was the first in more than a decade – had eased financial conditions and helps explain why the US inflation outlook and employment “remains largely favourable.”
In July the Federal Reserve chair described the interest rate cut as a “mid-cycle adjustment” of monetary policy, rather than the start of a proper cutting cycle. That comment could come back to haunt him if the US enters a recession – as markets are pricing – but in the short term investors will be keen to see whether he repeats this message.
But he lists a number of recent “developments” that the Fed has kept an eye on, including (drumroll, please):
Lee Hardman and Fritz Louw, analysts at MUFG Bank, expect a stronger dollar after he speaks:
The announcement of new US tariffs on imports from China
We think he will likely stick with this theme, but highlight increased concern over the global economic outlook and the potential impact this could have on the US economy going forward.
Economic slowdown in Germany and China
Even though we expect a dovish overall message from Chair Powell, it will likely fall short of the capitulation demanded by the market and US President Trump. The dollar will likely be supported on the back of this.
Growing possibility of a hard Brexit
As we approach midday in London, stock markets remain on the rise across Europe, with investors awaiting Federal Reserve chairman Jerome Powell in three hours’ time.
Rising tensions in Hong Kong
The FTSE 100 is up by 0.6%, while the FTSE 250 increased by 0.9%. The Stoxx 600 has also risen by 0.4%, but shed some of its earlier gains.
Equity markets have been volatile. Long-term bond rates around the world have moved down sharply to near post-crisis lows.
Rising bond yields – as investors position for a slightly more hawkish message from Powell – have boosted the US dollar. Higher government bond yields generally suggest that investors expect tighter monetary policy, making the country’s currency more attractive.
Meanwhile, the U.S. economy has continued to perform well overall, driven by consumer spending.
The dollar index, which measures the greenback against a trade-weighted basket of currencies, has risen by 0.3% today.
More highlights from Mr Powell’s speech.
While central bankers are meeting at Jackson Hole, the leaders of the world’s largest advanced economies have their own shindig: the G7 summit in Biarritz, in the south of France.
He has hailed the strong performance of the US economy, at least on balance:
Prime Minister Boris Johnson is there. Brexit is predictably on the agenda, for the British at least. You can follow the twists and turns today on the politics live blog.
The outlook for the US economy since the start of the year has continued to be a favourable one.
Brexiter Tories tell Boris Johnson backstop is not only problem with withdrawal agreement - live news
Business investment and manufacturing have weakened, but solid job growth and rising wages have been driving robust consumption and supporting moderate growth overall.
However, the start of the summit has been dominated by the reaction to wildfires in the Amazon. Emmanuel Macron, the French president, called for emergency talks on the subject at this week’s G7 summit.
But he laments that the global growth outlook has been “deteriorating” since mid-2018, mostly due to trade wobbles:
Scientists have called for international pressure on Brazil’s president, Jair Bolsonaro, who has pursued a policy of developing the Amazon. Deforestation is thought to contribute directly to global heating.
Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States. Inflation fell below our objective at the start of the year. It appears to be moving back up closer to our symmetric 2% objective, but there are concerns about a more prolonged shortfall.
You can read more here:
Equity markets seem to have been soothed – if only slightly – by Powell’s comments.
Amazon rainforest fires: global leaders urged to divert Brazil from 'suicide' path
The S&P 500 is now just trading lower by around 0.16% compared to minus 0.43% earlier.
Huawei, the Chinese tech giant at the heart of the geopolitical dispute with the US, said on Friday its business has been less impacted by trade restrictions than initially feared.
The Dow is now flat, after trading lower by minus 0.36%.
The $100bn company is “fully prepared” to live and work with US sanctions, it said.
The Nasdaq is now down around 0.3%
In June Huawei founder and chief executive Ren Zhengfei said US trade restrictions would dent revenue by $30bn this year.
Powell alludes to Washington’s trade war with China, saying the central bank is well aware of “trade policy uncertainty” but is powerless to influence trade deals despite their affect on the US economy:
Eric Xu, Huawei’s deputy chairman, was at a news conference earlier to introduce new artificial intelligence chips at its headquarters in Shenzhen. He said via Reuters:
Setting trade policy is the business of Congress and the Administration, not that of the Fed. Our assignment is to use monetary policy to foster our statutory goals.
It seems it’s going to be a little less than that. But you have to wait till our results in March.
In principle, anything that affects the outlook for employment and inflation could also affect the appropriate stance of monetary policy, and that could include uncertainty about trade policy.
Washington said this week that it will extend by 90 days a reprieve that permits Huawei to buy from US firms in order to supply existing customers, but it also moved to add more than 40 of Huawei’s units to its economic blacklist.
There are, however, no recent precedents to guide any policy response to the current situation. Moreover, while monetary policy is a powerful tool that works to support consumer spending, business investment and public confidence, it cannot provide a settled rulebook for international trade.
Greggs is planning to roll out more vegan products, after the stunning marketing success of its vegan sausage roll.
We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives.
Chief executive Roger Whiteside said the company is looking at new products replacing meat with Quorn, in an interview with LBC radio station.
The Federal Reserve has released Jerome Powell’s speech at Jackson Hole. Here are some highlights:
Greggs sales topped £1bn for the first time last year, and the launch of the vegan sausage roll at the start of the year helped it to buck the struggles of the high street.
The US economy continues to perform well, but he notes a sharp drop in global long-term bond rates and volatility across stock markets
Whiteside said:
The risks to financial stability appear to be “moderate” but Powell insists that “we remain vigilant”
We are working away at trying to see if we can come up with a vegan version of all our top-selling lines. Obviously people want a vegan option.
He says the US economy is in a “favourable place” and that the Federal Reserve will “act as appropriate to sustain the expansion with a strong labour market and inflation near its symmetric 2% objective”
If we can succeed in doing that and produce something that tastes just as good as the meat version, then that will sell very successfully. That’s what’s been shown with the vegan sausage roll.
RBS and Santander may be smarting from the competition regulator’s telling off this morning, but in a neat one-two punch the Financial Conduct Authority (FCA) has now criticised the claims management companies (CMCs) who have profited so immensely from the PPI scandal.
The FCA on Friday said it has “found widespread poor-practice in CMCs” using misleading adverts.
CMCs make complaints on behalf of their customers – often taking fees as high as 30% of any compensation won. Regulators say they help people claim who otherwise would not be able.
However, the FCA found a litany of abuses, including failing to tell users they can easily claim themselves, appearing to say customers would be better off using a CMC, and using misleadingly high compensation examples in adverts.
New rules from the FCA require CMC firms to:
identify themselves as a claims management company
prominently state if a claim can be made to a statutory ombudsman / compensation scheme without using a CMC and without incurring a fee
include prominent information relating to fees and termination fees which the customer may have to pay if a firm uses the term ‘no win, no fee’ or a term with similar meaning
The regulator took over regulation of CMCs on 1 April 2019, after the previous regulator was widely criticised as toothless.
While the PPI deadline on 29 August will deprive CMCs of a their most valuable income stream, the industry has moved on to other areas in its search for new revenue – notably in the payday loans sector. The Guardian previously reported an avalanche of spurious complaints from some firms.
After something of a flurry of company news (particularly for a Friday in late August), here’s a round-up of markets.
The FTSE 100 is up by 0.7% to 7,180 points, boosted by the weaker pound. The mid-cap FTSE 250 is up by about 1% – boosted by Peppa Pig owner Entertainment One.
Across Europe it was a sea of green, with all of the major indices gaining.
Sterling has lost 0.4% against the US dollar, with one pound buying $1.2204. Against the euro the pound had lost 0.2%.
The euro is down by 0.1% against the dollar, with the trade-weighted dollar basket up by 0.2% as investors await a speech by Federal Reserve boss Jerome Powell.
