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| European stocks hit four-year high despite Chinese profits slump – business live | European stocks hit four-year high despite Chinese profits slump – business live |
| (32 minutes later) | |
| Rolling coverage of the latest economic and financial news, as US president Trump claims a trade deal is very close | Rolling coverage of the latest economic and financial news, as US president Trump claims a trade deal is very close |
| What happened to volatility?! | |
| The financial markets feel unnaturally calm and still at present -- and that’s because volatility has slipped to unusually low levels. | |
| This chart from Royal Bank of Canada shows that the volatility between significant ‘pairs’ of currencies, such as euro-US dollar, and the Australian and New Zealand dollars, have collapsed. | |
| That shows that assets are increasingly moving in lockstep, | |
| It’s not just currencies either. Shares, treasury bills and oil futures are all equally subdued. That reflects the lack of major news recently, and the long wait for a trade war breakthrough. | |
| The UK’s FTSE 100 index is up 10% so far this year, while the EU-wide Stoxx 600 has gained 21.5%. | The UK’s FTSE 100 index is up 10% so far this year, while the EU-wide Stoxx 600 has gained 21.5%. |
| And a new poll by Reuters shows that many investors expect the rally to run on in 2020, as fears of a global recession ease. | And a new poll by Reuters shows that many investors expect the rally to run on in 2020, as fears of a global recession ease. |
| 53 out of 102 analysts, brokers and strategists reckon that risks to the market are “to the upside” - meaning shares could do better than generally expected next year. | 53 out of 102 analysts, brokers and strategists reckon that risks to the market are “to the upside” - meaning shares could do better than generally expected next year. |
| Back in August, two-thirds of those polled thought risks were tilted to the downside. | Back in August, two-thirds of those polled thought risks were tilted to the downside. |
| Recent signs of progress in the US-China trade talks have fuelled recent optimism, but investors want to see an actual breakthrough at some point! | Recent signs of progress in the US-China trade talks have fuelled recent optimism, but investors want to see an actual breakthrough at some point! |
| Shares in smaller UK companies are also pushing higher today. | Shares in smaller UK companies are also pushing higher today. |
| The FSTE 250 index of medium-sized listed firms has jumped another 79 points, or 0.38%, to 20,944 -- its highest level since August 2018. | The FSTE 250 index of medium-sized listed firms has jumped another 79 points, or 0.38%, to 20,944 -- its highest level since August 2018. |
| British American Tobacco is the top riser in London today, despite a slowdown in its e-cigarettes division. | British American Tobacco is the top riser in London today, despite a slowdown in its e-cigarettes division. |
| BAT told shareholders today that it was benefitting from higher prices, and greater market share, in old-school ‘combustible’ cigarettes. This means revenue growth should hit the top end of its expectations - lifting BAT’s shares by 2.5%. | BAT told shareholders today that it was benefitting from higher prices, and greater market share, in old-school ‘combustible’ cigarettes. This means revenue growth should hit the top end of its expectations - lifting BAT’s shares by 2.5%. |
| However.. revenues from “new category” such as e-cigarettes and heated tobacco will only reach the lower end of its goal of 30-50% growth. | However.. revenues from “new category” such as e-cigarettes and heated tobacco will only reach the lower end of its goal of 30-50% growth. |
| The boom in vaping is now under pressure, with President Donald Trump now pushing for a minimum age of 21 for the purchase of e-cigarette products. | The boom in vaping is now under pressure, with President Donald Trump now pushing for a minimum age of 21 for the purchase of e-cigarette products. |
| Mining stocks are rallying this morning, despite the slump in Chinese factory profits. | Mining stocks are rallying this morning, despite the slump in Chinese factory profits. |
| Trade war optimism seems to be outweighing anxiety over China. And that’s pushed the Stoxx 600 index to a new four-year high. | Trade war optimism seems to be outweighing anxiety over China. And that’s pushed the Stoxx 600 index to a new four-year high. |
| Stocks are up in Paris, Frankfurt, Milan and Madrid, as well as London. Basic materials producers, consumer firms, banks and tech stocks are all having a good day. | Stocks are up in Paris, Frankfurt, Milan and Madrid, as well as London. Basic materials producers, consumer firms, banks and tech stocks are all having a good day. |
| Jasper Lawler of London Capital Group explains how hopes of a Phase One trade deal (and how often have we read that?!) are pushing equities higher. | Jasper Lawler of London Capital Group explains how hopes of a Phase One trade deal (and how often have we read that?!) are pushing equities higher. |
| Britain’s FTSE 100 has hit a two-month high this morning, as election worries push the pound down. | Britain’s FTSE 100 has hit a two-month high this morning, as election worries push the pound down. |
| The blue-chip index has gained 38 points, or 0.5%, to 7441, its highest point since late September. | The blue-chip index has gained 38 points, or 0.5%, to 7441, its highest point since late September. |
| Major multinationals are among the risers, as they benefit from a small drop in sterling today to $1.284. That makes their overseas earnings a little more valuable in pound terms. | Major multinationals are among the risers, as they benefit from a small drop in sterling today to $1.284. That makes their overseas earnings a little more valuable in pound terms. |
| Investors are also clinging to hopes of a trade war breakthrough. | Investors are also clinging to hopes of a trade war breakthrough. |
| China’s stock market has lost ground today, as the sharp drop in factory profits worried investors. | China’s stock market has lost ground today, as the sharp drop in factory profits worried investors. |
| Nearly every sector fell, led by consumer cyclicals (-1.3%) and industrial companies (-1%). | Nearly every sector fell, led by consumer cyclicals (-1.3%) and industrial companies (-1%). |
| Other Asia-Pacific markets rose, though, helped by Trump’s latest claim that a trade war deal was close. | Other Asia-Pacific markets rose, though, helped by Trump’s latest claim that a trade war deal was close. |
| Japan’s Nikkei: up 64 points or 0.3% at 23,437 | Japan’s Nikkei: up 64 points or 0.3% at 23,437 |
| China’s CSI 300: down 16 points or 0.4% at 3,875 | China’s CSI 300: down 16 points or 0.4% at 3,875 |
| Australia’s S&P/ASX 200: up 63 points or 0.9% at 6,850 | Australia’s S&P/ASX 200: up 63 points or 0.9% at 6,850 |
| South Korea’s KOSPI 200: up 1 point or 0.35% at 282.5 | South Korea’s KOSPI 200: up 1 point or 0.35% at 282.5 |
| As is his wont, Donald Trump has been talking up the prospects of a trade deal with China. | As is his wont, Donald Trump has been talking up the prospects of a trade deal with China. |
| He told reporters at the White House last night that a breakthrough was imminent... but also implied that Beijing needs to calm the situation in Hong Kong first. | He told reporters at the White House last night that a breakthrough was imminent... but also implied that Beijing needs to calm the situation in Hong Kong first. |
| Trump declared: | Trump declared: |
| Trump’s only talking about the Phase One deal, of course. That would probably see China commit to buying more US agricultural products in return for some tariffs being relaxed. | Trump’s only talking about the Phase One deal, of course. That would probably see China commit to buying more US agricultural products in return for some tariffs being relaxed. |
| Commodity prices have been hammered by the slide in Chinese factory profits. Iron ore and steel prices have both fallen today, on fears of falling demand. | Commodity prices have been hammered by the slide in Chinese factory profits. Iron ore and steel prices have both fallen today, on fears of falling demand. |
| Reuters has the details: | Reuters has the details: |
| These charts from Bloomberg show clearly how Chinese factory earnings have deteriorated rapidly this year: | These charts from Bloomberg show clearly how Chinese factory earnings have deteriorated rapidly this year: |
| 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. |
| As the trade war between Beijing and Washington drags on, Chinese factories are being hit hard -- fuelling concerns that the world’s second-largest economy is losing momentum. | As the trade war between Beijing and Washington drags on, Chinese factories are being hit hard -- fuelling concerns that the world’s second-largest economy is losing momentum. |
| Profits at China’s industrial firms tumbled by almost 10% year-on-year in October, new government data show today. That’s the worst slump in eight months, suggesting the tariffs imposed on Chinese imports by the US are hurting. | Profits at China’s industrial firms tumbled by almost 10% year-on-year in October, new government data show today. That’s the worst slump in eight months, suggesting the tariffs imposed on Chinese imports by the US are hurting. |
| This is the third monthly decline in factory profits in a row, and much worse than the 5.3% decline seen in September. | This is the third monthly decline in factory profits in a row, and much worse than the 5.3% decline seen in September. |
| It appears to be the worst decline in a single month in at least eight years! However, there was a 14% slump in January-February (when the Lunar New Year distorts the data). Either way, it’s a bad sign. | It appears to be the worst decline in a single month in at least eight years! However, there was a 14% slump in January-February (when the Lunar New Year distorts the data). Either way, it’s a bad sign. |
| So far this year, profits across China’s massive factory sector are down 2.9%, with manufacturing profits slumping by almost 5%. That will worry Beijing, and could force policymakers to consider new stimulus measures. | So far this year, profits across China’s massive factory sector are down 2.9%, with manufacturing profits slumping by almost 5%. That will worry Beijing, and could force policymakers to consider new stimulus measures. |
| Zhu Hong, a senior statistician at China’s National Bureau of Statistics said the decline in profits was mainly due to “a bigger decline in the output price of industrial products, slowing growth of production and sales and other factors.” | Zhu Hong, a senior statistician at China’s National Bureau of Statistics said the decline in profits was mainly due to “a bigger decline in the output price of industrial products, slowing growth of production and sales and other factors.” |
| We already know that China’s growth hit a near-30 year low in the July-September quarter, and this implies that the fourth quarter of 2019 is tough too. | We already know that China’s growth hit a near-30 year low in the July-September quarter, and this implies that the fourth quarter of 2019 is tough too. |
| Economist George Magnus says China’s economy is clearly “still struggling”: | Economist George Magnus says China’s economy is clearly “still struggling”: |
| Nie Wen, economist at Shanghai-based Hwabao Trust, fears that Chinese industrial firms will keep struggling, saying (via Reuters): | Nie Wen, economist at Shanghai-based Hwabao Trust, fears that Chinese industrial firms will keep struggling, saying (via Reuters): |
| Such weak data also puts more pressure on president Xi Jinping to agree a trade deal with America. That, though, would require big concessions on issues such as intellectual property protections and curbing state subsidies of Chinese firms. | Such weak data also puts more pressure on president Xi Jinping to agree a trade deal with America. That, though, would require big concessions on issues such as intellectual property protections and curbing state subsidies of Chinese firms. |
| The US stock market hit another record high last night, as investors cling to hopes that a deal will be reached soon. | The US stock market hit another record high last night, as investors cling to hopes that a deal will be reached soon. |
| We’ll find out later today if America’s economy is suffering any ill-effects from the trade dispute, when the latest personal income and home sales data is released, along with updated Q3 growth figures. | We’ll find out later today if America’s economy is suffering any ill-effects from the trade dispute, when the latest personal income and home sales data is released, along with updated Q3 growth figures. |
| The agenda | The agenda |
| 1.30pm GMT: Second reading of US third-quarter GDP. Expected to be unchanged, with annualise growth of 1.9% | 1.30pm GMT: Second reading of US third-quarter GDP. Expected to be unchanged, with annualise growth of 1.9% |
| 3pm GMT: US personal income and pending home sales for October | 3pm GMT: US personal income and pending home sales for October |