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| Wall Street hits record high after US GDP is revised up – business live | Wall Street hits record high after US GDP is revised up – business live |
| (32 minutes later) | |
| America’s economy grew faster than thought in July-September, despite the trade war with China | America’s economy grew faster than thought in July-September, despite the trade war with China |
| A quick recap. | |
| Stocks have continued to march higher, helped by improved US growth figures and hopes of a trade deal between Washington and Beijing | |
| The US stock market has struck a new high in early trading, with the Dow breaking over the 28,100 mark for the first time. | |
| The rally came after America’s economic growth in the third quarter was revised up, to an annualised rate of 2.1%. That’s up from 1.9%, and confirms that the US grew faster than the UK, the eurozone or Japan. | |
| European stocks have also rallied today, pushing the Stoxx 600 up to a four-year high. Britain’s FTSE 100 is at a two-month peak. | |
| Investors have predicted that the rally will continue into 2020.... | |
| ...but the UK general election will have a significant impact on stocks, and sterling, Capital Economics say in a new report. | |
| There are also signs that the trade war is causing real economic harm. Chinese factory profits tumbled by 9.9% in October, the worst slump in eight years. This shows that its economy is struggling. | |
| American firms aren’t immune either. Deere & Co, famous for its tractors and combine harvesters, has slashed its forecasts for 2020 and blamed trade tensions, plus the weather. | |
| Just in: US personal spending rose by 0.3% in October, in line with forecasts. | |
| But pending home sales fell by -1.7%, much worse than the 0.2% rise expected. We learned yesterday that house prices were rising across US cities, but it appears that a shortage of properties is hurting. | |
| Pharmaceutical firm Pfizer is the biggest rise on the Dow, up 1% in early trading. | Pharmaceutical firm Pfizer is the biggest rise on the Dow, up 1% in early trading. |
| Goldman Sachs (+0.6%), Apple (+0.5%) and Walmart (+0.44%) are also helping to push the index to its latest record high, with Nike and JP Morgan close behind. | Goldman Sachs (+0.6%), Apple (+0.5%) and Walmart (+0.44%) are also helping to push the index to its latest record high, with Nike and JP Morgan close behind. |
| But not every stock is up, of course. | But not every stock is up, of course. |
| Caterpillar is the biggest faller (-1.4%) following today’s profits warning from rival construction and agricultural vehicles maker Deere & Co (which has fallen 4%). | Caterpillar is the biggest faller (-1.4%) following today’s profits warning from rival construction and agricultural vehicles maker Deere & Co (which has fallen 4%). |
| Boeing has also lost around 1%, following a report that a 777X’s fuselage “split dramatically” during a stress test in September. | Boeing has also lost around 1%, following a report that a 777X’s fuselage “split dramatically” during a stress test in September. |
| Boom! Wall Street has hit a fresh record high in early trading in New York, helped by today’s growth report. | Boom! Wall Street has hit a fresh record high in early trading in New York, helped by today’s growth report. |
| The Dow Jones industrial average has gained 46 points, or 0.16% to 28,112.58 points for the first time ever. | The Dow Jones industrial average has gained 46 points, or 0.16% to 28,112.58 points for the first time ever. |
| The S&P 500, which includes a much wider range of companies than the Dow, is also at record levels - up 5.55 points at 3,146.07. | The S&P 500, which includes a much wider range of companies than the Dow, is also at record levels - up 5.55 points at 3,146.07. |
| This is just the latest in a series of record highs, as the US market has gained around 20% during 2019. | This is just the latest in a series of record highs, as the US market has gained around 20% during 2019. |
| Greg Daco of Oxford Economics has dug into today’s US growth report: | Greg Daco of Oxford Economics has dug into today’s US growth report: |
| The US has cemented its position as the fastest-growing member of the G7 in the last quarter, thanks to today’s GDP upward revision. | The US has cemented its position as the fastest-growing member of the G7 in the last quarter, thanks to today’s GDP upward revision. |
| But that’s not terribly impressive, given the lacklustre growth in both the eurozone and Japan. | But that’s not terribly impressive, given the lacklustre growth in both the eurozone and Japan. |
| Here’s the latest GDP figures for July-September. | Here’s the latest GDP figures for July-September. |
| US: >+0.5% quarter-on-quarter [or a quarter of the annualised rate] | US: >+0.5% quarter-on-quarter [or a quarter of the annualised rate] |
| UK: +0.3% q/q | UK: +0.3% q/q |
| France: +0.3% q/q | France: +0.3% q/q |
| Japan: +0.1% q/q | Japan: +0.1% q/q |
| Germany: +0.1% q/q | Germany: +0.1% q/q |
| Italy: +0.1% q/q | Italy: +0.1% q/q |
| Canada: yet to report.... | Canada: yet to report.... |
| Today’s GDP revisions suggest there’s less danger of a US recession. | Today’s GDP revisions suggest there’s less danger of a US recession. |
| But despite growth being revised up, economists and investors are still cautious about the economic picture. | But despite growth being revised up, economists and investors are still cautious about the economic picture. |
| Here’s some snap reaction: | Here’s some snap reaction: |
| The latest US jobless data is also stronger than expected. | The latest US jobless data is also stronger than expected. |
| Just 213,000 Americans signed on for unemployment benefit last week, down from 228,000 in the previous seven days. | Just 213,000 Americans signed on for unemployment benefit last week, down from 228,000 in the previous seven days. |
| In a further boost, US durable goods orders jumped by 0.6% in October. | In a further boost, US durable goods orders jumped by 0.6% in October. |
| That’s much better than the 0.5% contraction which economists expected, following a 1.4% decline in September. | That’s much better than the 0.5% contraction which economists expected, following a 1.4% decline in September. |
| Today’s US growth report is “a decent result under the circumstances, as the economy continues to outpace many of its peers”, says Craig Erlam, senior market analyst at OANDA Europe. | Today’s US growth report is “a decent result under the circumstances, as the economy continues to outpace many of its peers”, says Craig Erlam, senior market analyst at OANDA Europe. |
| Newsflash: America’s economy grew faster than previously though in the third quarter of this year. | Newsflash: America’s economy grew faster than previously though in the third quarter of this year. |
| New data show that GDP grew at an annualised rate of 2.1% in July-September -- the equivalent of just over 0.5% during the quarter. | New data show that GDP grew at an annualised rate of 2.1% in July-September -- the equivalent of just over 0.5% during the quarter. |
| That’s up from the 1.9% annualised rate estimated a month ago -- showing the US economy is a little stronger than expected. | That’s up from the 1.9% annualised rate estimated a month ago -- showing the US economy is a little stronger than expected. |
| The Commerce Department has revised up its estimate of inventory growth, and private investment in the last quarter. It also believes personal consumption was a little bit stronger than first thought. | The Commerce Department has revised up its estimate of inventory growth, and private investment in the last quarter. It also believes personal consumption was a little bit stronger than first thought. |
| Marketwatch has the details: | Marketwatch has the details: |
| Back in the UK, Capital Economics have issued an interesting research note on how next month’s election could move the markets, and affect the economy. | Back in the UK, Capital Economics have issued an interesting research note on how next month’s election could move the markets, and affect the economy. |
| On an economic perspective, they argue that the best outcome for Brexit is a Labour-led government - which would negotiate a softer withdrawal agreement followed by a referendum which Remain could win. | On an economic perspective, they argue that the best outcome for Brexit is a Labour-led government - which would negotiate a softer withdrawal agreement followed by a referendum which Remain could win. |
| The worst outcome, though, would be a Conservative minority government as this could lead to a no-deal crisis at the end of January 2020, or December 2020. | The worst outcome, though, would be a Conservative minority government as this could lead to a no-deal crisis at the end of January 2020, or December 2020. |
| A Conservative majority - the most likely outcome at pixel time - is “somewhere in between”. | A Conservative majority - the most likely outcome at pixel time - is “somewhere in between”. |
| But how about asset prices? They have plenty of predictions, including: | But how about asset prices? They have plenty of predictions, including: |
| Despite Deere’s gloominess, Wall Street could hit a new all-time high when trading begins in 90 minutes. | Despite Deere’s gloominess, Wall Street could hit a new all-time high when trading begins in 90 minutes. |
| Looking ahead, Deere & Co is also bracing for equipment sales to fall significantly next year. | Looking ahead, Deere & Co is also bracing for equipment sales to fall significantly next year. |
| Here’s the details: | Here’s the details: |
| Deere has also reported a 9% drop in adjusted operating profits in the last year, partly due to lower earnings from equipment sales. | Deere has also reported a 9% drop in adjusted operating profits in the last year, partly due to lower earnings from equipment sales. |
| That also suggests the trade war, which cut sales of US soybeans to China, has deterred farmers from buying new tractors. | That also suggests the trade war, which cut sales of US soybeans to China, has deterred farmers from buying new tractors. |
| CEO John May says: | CEO John May says: |
| Just in: The firm behind John Deere tractors and combine harvesters has issued a profit warning, and blamed the US-China trade war. | Just in: The firm behind John Deere tractors and combine harvesters has issued a profit warning, and blamed the US-China trade war. |
| Deere & Co slashed its profit forecast for 2020, warning that farmers are more cautious about investing in new technology. | Deere & Co slashed its profit forecast for 2020, warning that farmers are more cautious about investing in new technology. |
| It blames the tariffs imposed on US farm exports by China, during the tit-for-tat dispute with the US, along with recent poor weather. | It blames the tariffs imposed on US farm exports by China, during the tit-for-tat dispute with the US, along with recent poor weather. |
| CEO John May told shareholders: | CEO John May told shareholders: |
| Deers now expects its net income in 2020 to reach $2.7bn to $3.1bn. Wall Street had expected $3.4bn. | Deers now expects its net income in 2020 to reach $2.7bn to $3.1bn. Wall Street had expected $3.4bn. |
| Shares in Deere have slumped over 4% in pre-market trading. | Shares in Deere have slumped over 4% in pre-market trading. |
| Global stock markets are creeping close to a record high today. | Global stock markets are creeping close to a record high today. |
| The MSCI all-country world index is now 0.4% shy of its previous peak, thanks to the rally in Europe and (most of) the Asia-Pacific region today. | The MSCI all-country world index is now 0.4% shy of its previous peak, thanks to the rally in Europe and (most of) the Asia-Pacific region today. |
| What happened to volatility?! | 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. | 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. | 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, | 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. | 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. |