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Chinese factories shrink again, ahead of eurozone growth report - business live Hong Kong protests drag economy into recession – business live
(about 3 hours later)
This latest decline in China’s factory activity shows that the trade war is “biting” and hitting exports, says Neil Wilson of Markets.com. Finally, some good news. Italy’s economy has returned to growth, with a 0.1% increase in GDP in the last quarter.
He writes: #Italy surprises positively! Grew 0.1% in Q3 vs 0% expected. pic.twitter.com/iV5suPPedt
We hearing slightly less optimistic noises on the trade war front. US demands for China to buy set levels of agricultural products are threatening to derail trade negotiations. Associated Press have written about the impact of Hong Kong’s recession on the tourism industry:
China doesn’t want to commit to what the US wants and this could prove problematic to finalising the phase one agreement. Crossing the wires now the China foreign ministry has hit back at comments made by US Secretary of State Mike Pompeo, who launched a pretty fiery attack on Communist China in a speech. Kong’s main tourist strip, Ashfaqur Rahman’s tailor shop usually is a mainstay for tourists dropping in to peruse neatly stacked rolls of fabric and get measured for custom-made suits.
Failure to get the phase one deal over the line would be negative for risk appetite and raise expectations for the Fed to ease again. Not anymore.
Chinese factories also reported that they’re cutting staffing levels. Business has dried up since anti-government protests began in early June in the Asian financial center.
#China manufacturers continue to struggle. Factory activity shrank for 6th month in row. Oct PMI fell to 49.3 v. 49.8 in Sep (and worse than est. 49.8). Manufacturers also shed jobs: sub-index for employment at 47.3 in Oct v. 47.0 Sep. On Thursday, the government said Hong Kong’s economy shrank 3.2% in July-September from the previous quarter, pushing the city into a technical recession.
Growth across China’s service sector companies has also weakened this month, in another worrying sign. That makes two straight quarters of contraction since the economy contracted 0.5% in April-June on a quarterly basis.
The non-manufacturing PMI, which monitors the health of services firms, dropped to 52.8 from 53.7 in September. The once-common lines of Chinese shoppers outside Hong Kong’s glittering luxury stores are gone. Jewelry stores have no customers and related businesses like transportation are languishing.
That’s indicates a slowdown, and is closer to the 50-point mark showing stagnation. Rahman said his monthly sales have tumbled 80% from an average of 200,000 Hong Kong dollars ($25,500) in better times.
The drop in #China's Non-Manufacturing #PMI is starting to look slightly worrying. Down to 52.8 from as high as 54.9 one year ago. pic.twitter.com/e4kPC8MqF1 His shop is tucked away in a passage off Nathan Road in the Tsim Sha Tsui district, which teems with posh hotels and upscale jewelry and fashion boutiques, set against the stunning backdrop of Victoria Harbor.
China’s manufacturing PMI, chart @BloombergTV https://t.co/YOyJSve2UM pic.twitter.com/zV6gMpcPs6 But on recent weekends the neighborhood has become a protest battle zone, with black-clad demonstrators clashing late into the night with riot police unleashing tear gas and water cannons.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. “This is the worst we’ve seen,” said Rahman, a Bangladeshi immigrant who opened the shop 14 years ago. His sales now barely cover the rent and he and his business partner are dipping into their own pockets to pay the salaries of their five staff. He’s not sure they’ll be able to carry on if there’s no resolution to the increasingly violent protests.
There are signs of economic weakness in China this morning, and Europe may soon add to the Halloween gloom. Tommy Wu, a Hong Kong-based economist with Oxford Economics, says:
Chines factory activity shrank for the sixth straight month in October, new official figures show. “Much of the pressure is now coming from the political unrest.
The official Chinese Purchasing Managers Survey for the manufacturing industry, released overnight, fell to just 49.3, from 49.8. This is the sixth month running in which the factory PMI has slipped below the 50-point mark. The trade war itself would cause Hong Kong’s GDP growth to slow but not a contraction, while the political unrest could.”
It’s another sign that China’s economy has weakened, after more than a year of trade conflict. Hong Kong’s economy looks to be in even worse shape than feared, says CNN.
As Stephen Innes of Axitrader puts it: It blames months of protests that forced shops to close, paralyzed public transportation and scared off tourists, saying:
The data was horrible as trade tensions, and a slow recovery in domestic demand continued to weigh on the manufacturing sector. Hong Kong plunged into recession in the third quarter, according to official data released Thursday. The economy shrank 3.2% during the three months to September, compared to the previous quarter.
Last night, the US Federal Reserve cited the US-China trade war as a key risk to America’s economic expansion, as it cut interest rates for the third time this year. That’s a sharp slowdown from the 0.5% contraction recorded in the second quarter, and much worse than economists had expected.
This pushed Wall Street to fresh record highs at the close of trading, as we blogged last night: With no immediate resolution to the city’s political crisis on the cards, Hong Kong’s first recession in a decade could extend into the new year.....
US Federal Reserve cuts interest rates, sending S&P 500 to record high - as it happened As a major trading hub, Hong Kong was already hurting from the US-China trade war and China’s slowing growth. Five months of mass demonstrations is now pushing the city toward an economic crisis.
We also learned yesterday that America’s economy slowed slightly in the last quarter, to an annualised rate of 1.9% (or almost 0.5% quarter-on-quarter). More here: Hong Kong’s first recession in a decade could be even worse than feared
Europe would love such a performance, though. Eurozone growth data, due this morning, may show that growth slowed to just 0.1% in July-September, from 0.2% in April-June. Newsflash: the eurozone grew by 0.2% in the third quarter of this year.
Although France grew by 0.3%, there are fears that a German recession and a stagnating Italian economy is holding the eurozone back. We find out at 10am. That’s stronger than the 0.1% growth expected, but still a weak performance. It matches the 0.2% growth recorded in the April-June quarter.
Early evidence of #Eurozone #GDP #growth in third quarter emerging (preliminary "flash" estimate is out on Thursday). Data out so far show Q3 growth of 0.3% q/q in #France, 0.4% q/q in #Belgium & 0.2% q/q in #Austria. Very real likelihood #Germany saw modest Q3 q/q contraction The wider European Union grew by 0.3% in July-September, according to statistics body Eurostat.
The markets are expected to be calm this morning, as investors digest last night’s Fed cut, and strong results from two tech giants. That may be a sign that Britain’s economy returned to growth in the last quarter (we’ll find out next month, when UK GDP is released).
Apple posted record revenues for the last quarter, raking in $64bn, driven by strong demand for the iPhone and for wearable technology. Euro area #GDP +0.2% in Q3 2019, +1.1% compared with Q3 2018: preliminary flash estimate from #Eurostat https://t.co/lTwvFXO1nb pic.twitter.com/3Q1S4I8eeM
Apple reports $64bn in revenue, citing strong wearables and services sales Hong Kong fell into recession in Q3. GDP fell by 3.2%, lowering the annual growth rate to -2.9%, the worst since the financial crisis. pic.twitter.com/NKPWSkyz2K
Facebook also best forecasts, with revenues surging 29%. Despite steady criticism of the social media giant, it grew its monthly used base by 1.65% to 2.45 billion. Capital Economics has predicted that Hong Kong’s economy will continue to shrink in the current quarter, but probably at a slower rate.
European Opening Calls:#FTSE 7329 -0.03%#DAX 12922 +0.09%#CAC 5773 +0.12%#MIB 22701 +0.24%#IBEX 9279 -0.06%#STOXX 3621 +0.03% It told clients:
In the City, Lloyds Banking Group has taken yet another PPI provision of £1.8bn, and oil giant Shell has posted a 15% drop in profits due to the lower crude price (more on both stories shortly...) “Any recovery will be constrained by weak business investment, however, as the city’s political crisis has done lasting damage to its reputation as a stable and autonomous financial hub.
The agenda In another blow to Hong Kong - and the rest of the global economy - China apparently doesn’t believe it can agree a trade deal with Donald Trump.
10am GMT: Eurozone inflation for October Bloomberg has the story:
10am GMT: Eurozone third-quarter GDP (first estimate) Chinese officials are casting doubts about reaching a comprehensive long-term trade deal with the U.S. even as the two sides get close to signing a “phase one” agreement, Bloomberg News reported.
11am GMT: Italian third-quarter GDP In private conversations with visitors to Beijing and other interlocutors in recent weeks, Chinese officials have warned they won’t budge on the thorniest issues, according to people familiar with the matter. They remain concerned about President Donald Trump’s impulsive nature and the risk he may back out of even the limited deal both sides say they want to sign in the coming weeks.
12.30pm GMT: Canadian GDP report for August This has worried investors, sending stocks down across the globe. A protracted trade war is bad news for growth, at a time when most advanced economies are slowing.
In London, the FTSE 100 has lost 0.8%, or 60 points, dragged down by mining stocks and Royal Dutch Shell (following its slump in profits this morning).
spot where the China trade news crossed pic.twitter.com/ssoQ9UGwoJ
Hong Kong’s economy has also been hurt by the ongoing trade war between the US and China.
Here’s the AFP newswire’s take:
Hong Kong on Thursday confirmed it had plunged into its first recession since the global financial crisis as months of seething pro-democracy protests and the US-China trade war exact a heavy toll on the financial hub.
The semi-autonomous Chinese city has been upended by nearly five months of huge, often violent, pro-democracy demonstrations with little end in sight as Beijing and city leaders adopt a hardline approach.
Clashes between protesters hurling bricks and petrol bombs at police wielding tear gas and rubber bullets have become a weekly occurrence, hammering the city’s once-solid reputation for stability and safety.
The unrest has hit the city’s tourist and entertainment industries hard, compounding economic woes that were already being caused by the global trade war.
Figures released by the government on Thursday showed gross domestic product plunged 3.2% in the third quarter compared with the previous period, when it saw a 0.4% drop.
That means the city is experiencing a technical recession, with two back-to-back periods of contraction.
It is the first time the city has witnessed a recession since early 2009 at the height of the financial crisis.
Hong Kong’s economy was already facing strong headwinds at the start of 2019 as it was hit by the US-China trade war, battering a city that is hugely reliant on the world’s two largest economies.
Hong Kong has slid into a recession for the first time since the global financial crisis in the third quarter, advance estimates show. It's largely due to on-going anti-government protests, and the protracted U.S.-China trade war. #HongKong #recession
The Financial Times points out that several economists predict the recession could intensify in the next few quarters:
Iris Pang, an economist at ING, an investment bank, forecast that the economy would shrink in all four quarters next year.