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| Pound hits seven-month high; trade deal hopes grow – business | |
| (32 minutes later) | |
| Rolling coverage of the latest economic and financial news | Rolling coverage of the latest economic and financial news |
| The pound has hit its highest level in seven months, as City traders show increased confidence that Boris Johnson will win next week’s general election. | |
| Sterling has jumped to $1.3039, up nearly half a cent, to levels not seen since May 2019. | |
| Traders appear to be reacting to the latest Sky News/YouGov poll, which gave the Conservatives a nine-point lead ahead of Thursday’s general election. | |
| The poll puts the Tories on 42%, Labour on 33%, the Liberal Democrats are on 12%, and Brexit Party is on 4%, up two points. | |
| The City fears another hung parliament, which could mean more deadlock and possible a disorderly Brexit. So this polling is pushing the pound up. | |
| Rupert Thompson, Head of Research at Kingswood, says investor confidence in a Conservative victory has grown. | |
| But even at todays levels, the pound is still some 13% weaker than before the Brexit vote three years ago. | |
| Thompson explains: | |
| In a surprise twist, European stock markets are all rallying.... as hopes of a US-China trade deal grow again. | |
| Every index is up, with France, Italy andGermany rallying by over 1%, after unnamed sources claimed that Donald Trump had painted a too-gloomy picture of negotiations yesterday. | |
| According to these insiders, a deal could still be reached this month. | |
| Bloomberg has the details: | |
| Andy Bruce of Reuters shows how UK service sector growth has fizzled out this year: | Andy Bruce of Reuters shows how UK service sector growth has fizzled out this year: |
| If today’s PMIs are accurate, they suggest the UK could be sliding back to the brink of recession. | If today’s PMIs are accurate, they suggest the UK could be sliding back to the brink of recession. |
| Howard Archer of EY Item Club is revising down his hopes for growth in the fourth quarter of 2019, having seen November’s gloomy PMIs. | Howard Archer of EY Item Club is revising down his hopes for growth in the fourth quarter of 2019, having seen November’s gloomy PMIs. |
| Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, blames Brexit for the drop in UK service sector activity last month. | Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, blames Brexit for the drop in UK service sector activity last month. |
| Here’s his take on November’s PMIs: | Here’s his take on November’s PMIs: |
| Tim Moore, economics associate director at IHS Markit, says the UK economy is “staggering” through the final quarter of the year, with output falling at services companies and factories. | Tim Moore, economics associate director at IHS Markit, says the UK economy is “staggering” through the final quarter of the year, with output falling at services companies and factories. |
| Britain’s private sector shrank in November, as the ongoing Brexit uncertainty hurts the country’s dominant services sector. | Britain’s private sector shrank in November, as the ongoing Brexit uncertainty hurts the country’s dominant services sector. |
| That’s according to data firm Markit, which says its services PMI slumped to 49.3 last month. That’s down from October’s 50, which showed stagnation. | That’s according to data firm Markit, which says its services PMI slumped to 49.3 last month. That’s down from October’s 50, which showed stagnation. |
| That’s not quite as bad as the ‘flash’ estimate released a couple of weeks ago - but it’s still the worst reading since March. | That’s not quite as bad as the ‘flash’ estimate released a couple of weeks ago - but it’s still the worst reading since March. |
| Service sector managers say they suffered a drop in new business last month, with exports shrinking at the fastest rate in five years. | Service sector managers say they suffered a drop in new business last month, with exports shrinking at the fastest rate in five years. |
| Many firms warned that domestic political uncertainty was hurting their business, and dampening consumer spending. | Many firms warned that domestic political uncertainty was hurting their business, and dampening consumer spending. |
| We learned on Monday that factory output shrank. Put it together, and it suggests the UK economy is contracting by around 0.1% in the current quarter. | We learned on Monday that factory output shrank. Put it together, and it suggests the UK economy is contracting by around 0.1% in the current quarter. |
| More to follow.... | More to follow.... |
| Heads-up. | Heads-up. |
| Bloomberg is reporting that Washington and Beijing are making progress towards a trade deal. | Bloomberg is reporting that Washington and Beijing are making progress towards a trade deal. |
| It says: | It says: |
| That’s not what Donald Trump was suggesting yesterday... perhaps the market slump has unblocked negotiations? | That’s not what Donald Trump was suggesting yesterday... perhaps the market slump has unblocked negotiations? |
| The eurozone’s private sector had a lacklustre November. | The eurozone’s private sector had a lacklustre November. |
| The composite PMI, which measures activity across service sector firms and manufacturers, was unchanged at 50.6 -- showing modest growth. | The composite PMI, which measures activity across service sector firms and manufacturers, was unchanged at 50.6 -- showing modest growth. |
| The latest economic data from Hong Kong is an absolute shocker. | The latest economic data from Hong Kong is an absolute shocker. |
| Private sector activity slumped alarmingly last month, at the fastest rate since the Severe acute respiratory syndrome (SARS) virus crisis gripped the city, causing hundreds of deaths. | Private sector activity slumped alarmingly last month, at the fastest rate since the Severe acute respiratory syndrome (SARS) virus crisis gripped the city, causing hundreds of deaths. |
| Data firm Markit says its Hong Kong PMI, slumped to just 38.5 in November, from 39.3. Any reading over 50 shows growth, and a sub-40 reading suggest a sharp downturn. | Data firm Markit says its Hong Kong PMI, slumped to just 38.5 in November, from 39.3. Any reading over 50 shows growth, and a sub-40 reading suggest a sharp downturn. |
| We already knew that the pro-democracy demonstrations, and the clashes with security forces, pushed Hong Kong into recession in the last quarter. Clearly there’s no sign of recovery. | We already knew that the pro-democracy demonstrations, and the clashes with security forces, pushed Hong Kong into recession in the last quarter. Clearly there’s no sign of recovery. |
| Bernard Aw, Principal Economist at IHS Markit, said: | Bernard Aw, Principal Economist at IHS Markit, said: |
| Away from trade, we have bleak news from the UK high street | Away from trade, we have bleak news from the UK high street |
| Fast fashion chain Quiz has warned it could close a swathe of stores, after slumping into a £6.8m loss in the last six month. It blames the decline in visitors to physical stores, and hinted that it could close loss-making outlets when its leases expire. | Fast fashion chain Quiz has warned it could close a swathe of stores, after slumping into a £6.8m loss in the last six month. It blames the decline in visitors to physical stores, and hinted that it could close loss-making outlets when its leases expire. |
| The Chinese government has hit back against Donald Trump’s criticism. | The Chinese government has hit back against Donald Trump’s criticism. |
| At a press briefing, China’s foreign ministry warned that Beijing will take “the necessary countermeasures” to defend its interests. That sounds like a warning shot to Washington not to implement the tariffs planned for 15 December. | At a press briefing, China’s foreign ministry warned that Beijing will take “the necessary countermeasures” to defend its interests. That sounds like a warning shot to Washington not to implement the tariffs planned for 15 December. |
| After tumbling on Monday and Tuesday, European stock markets are attempting to clamber off the mat this morning. | After tumbling on Monday and Tuesday, European stock markets are attempting to clamber off the mat this morning. |
| The Stoxx 600 index, which includes the largest EU companies, has gained 0.4% - which recovers a chunk of yesterday’s losses. | The Stoxx 600 index, which includes the largest EU companies, has gained 0.4% - which recovers a chunk of yesterday’s losses. |
| The FTSE 100, though is flat, with a strengthening pound hitting multinationals. | The FTSE 100, though is flat, with a strengthening pound hitting multinationals. |
| Mohamed Zidan, chief market strategist at ThinkMarkets, says traders remain nervous: | Mohamed Zidan, chief market strategist at ThinkMarkets, says traders remain nervous: |
| Many parents look to their sons-in-law for help, perhaps with a tricky computing problem or a DIY task. | Many parents look to their sons-in-law for help, perhaps with a tricky computing problem or a DIY task. |
| Donald Trump, though, is turning to his eldest daughter’s husband to resolve the China trade war! | Donald Trump, though, is turning to his eldest daughter’s husband to resolve the China trade war! |
| According to Reuters, Jared Kushner, Trump’s son-in-law, has taken a more direct involvement in the negotiations with China over the past two weeks. Kushner does have experience of trade, having worked on the US-Mexico-Canada agreement hammered out a year ago. | According to Reuters, Jared Kushner, Trump’s son-in-law, has taken a more direct involvement in the negotiations with China over the past two weeks. Kushner does have experience of trade, having worked on the US-Mexico-Canada agreement hammered out a year ago. |
| Reuters says: | Reuters says: |
| Neil Wilson of Markets.com has sent over some salient points about the trade war situation, and how investors may react. | Neil Wilson of Markets.com has sent over some salient points about the trade war situation, and how investors may react. |
| Markets are discounting a trade deal with China being done this year, but it’s still not impossible. The caprice of Trump means, as we have consistently stressed, anything can happen. | Markets are discounting a trade deal with China being done this year, but it’s still not impossible. The caprice of Trump means, as we have consistently stressed, anything can happen. |
| An EU-US tit-for-tat trade war is a risk but not to be overplayed yet – most think it can be avoided | An EU-US tit-for-tat trade war is a risk but not to be overplayed yet – most think it can be avoided |
| Global equities have had a good run this year – there is still plenty of profit taking that could occur in the run-up to Christmas- do we see a repeat of last year and the ‘nightmare on Wall Street before Christmas’? | Global equities have had a good run this year – there is still plenty of profit taking that could occur in the run-up to Christmas- do we see a repeat of last year and the ‘nightmare on Wall Street before Christmas’? |
| The market, and Trump, ultimately know the Fed has their back. Pullbacks are to be expected as the market drifts higher and higher | The market, and Trump, ultimately know the Fed has their back. Pullbacks are to be expected as the market drifts higher and higher |
| 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. |
| The season of goodwill may be approaching, but clearly no-one told Donald Trump. | The season of goodwill may be approaching, but clearly no-one told Donald Trump. |
| The US president has spooked investors around the globe with a series of attacks on other nations, including some close allies, as he threatens to escalate his trade war. | The US president has spooked investors around the globe with a series of attacks on other nations, including some close allies, as he threatens to escalate his trade war. |
| Fresh from threatening France with tariffs on cheese and champagne, Trump hinted that he could use trade as a weapon to force NATO members to spend more on defence. | Fresh from threatening France with tariffs on cheese and champagne, Trump hinted that he could use trade as a weapon to force NATO members to spend more on defence. |
| But markets were really riled when the president suggested that he might wait to agree a trade deal with China until after the 2020 presidential election - a whole year away. A negotiating tactic, or an admission that talks behind the scenes are floundering? | But markets were really riled when the president suggested that he might wait to agree a trade deal with China until after the 2020 presidential election - a whole year away. A negotiating tactic, or an admission that talks behind the scenes are floundering? |
| Either way, Trump’s words sent stocks sliding in London and New York last night, with Britain’s FTSE sinking 127 points to a two-month low of 7158. | Either way, Trump’s words sent stocks sliding in London and New York last night, with Britain’s FTSE sinking 127 points to a two-month low of 7158. |
| We might see a small recovery this morning, but the mood in the City is rather unfestive. | We might see a small recovery this morning, but the mood in the City is rather unfestive. |
| Traders are concerned that America will impose fresh tariffs on China on December 15. Previously, there was hope that Washington would waive them, to help secure a Phase One deal with Beijing. | Traders are concerned that America will impose fresh tariffs on China on December 15. Previously, there was hope that Washington would waive them, to help secure a Phase One deal with Beijing. |
| The mood has totally changed in a couple of days, from optimism to pessimism. Jim Reid of Deutsche Bank tells clients this morning: | The mood has totally changed in a couple of days, from optimism to pessimism. Jim Reid of Deutsche Bank tells clients this morning: |
| Stocks in Asia-Pacific markets have already been hit, extending earlier losses this week. Australia’s S&P/ASX 200, which is vulnerable to a slowdown in China, has shed more than 1%. | Stocks in Asia-Pacific markets have already been hit, extending earlier losses this week. Australia’s S&P/ASX 200, which is vulnerable to a slowdown in China, has shed more than 1%. |
| Commodity prices are also being hammered, on concerns that global growth will be hurt by an escalating trade war. | Commodity prices are also being hammered, on concerns that global growth will be hurt by an escalating trade war. |
| The most-traded nickel contract on the Shanghai Futures Exchange has crumbled by over 4%. | The most-traded nickel contract on the Shanghai Futures Exchange has crumbled by over 4%. |
| Gold, though, is rising, as nervous investors look for a safe haven for their cash. | Gold, though, is rising, as nervous investors look for a safe haven for their cash. |
| Also coming up today | Also coming up today |
| Data firm Markit publishes its PMI surveys for the world’s service sector companies today. | Data firm Markit publishes its PMI surveys for the world’s service sector companies today. |
| The ‘flash’ estimates released two weeks ago were poor, and suggested Britain’s services sector contracted during November. So today’s ‘final PMI’ report could show that the UK economy is shrinking again..... | The ‘flash’ estimates released two weeks ago were poor, and suggested Britain’s services sector contracted during November. So today’s ‘final PMI’ report could show that the UK economy is shrinking again..... |
| The agenda | The agenda |
| 9am GMT: Eurozone services PMI for November | 9am GMT: Eurozone services PMI for November |
| 9.30am GMT: UK services PMI for November | 9.30am GMT: UK services PMI for November |
| 3pm GMT: US services PMI for November | 3pm GMT: US services PMI for November |
| 3pm GMT: Bank of Canada interest rate decision | 3pm GMT: Bank of Canada interest rate decision |