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Wall Street joins global selloff as trade wars grip markets - business live
Market selloff: Wall Street joins rout as trade war hits US economy - business live
(about 4 hours later)
Make that 400 points off the Dow!
Trade wars are so good and easy to win that the US government is notes> giving farmers a $16bn aid package.
The DJIA has now sunk by 1.5% to 25,377, as gloom grips the markets.
AFP has the details:
Dow drops 400 points, continuing this month's slide on trade-war fears https://t.co/AMZ14mHVdC pic.twitter.com/YnDmypf3ul
United States on Thursday unveiled a new $16 billion aid package to help farmers caught in the crossfire of President Donald Trump’s trade war with China.
Traders are racing to sell stocks as the opening bell rings out in New York.
Agriculture Secretary Sonny Perdue said the bulk of the funds will go to direct payments to farmers, while a small portion will be used to purchase food to use in US aid programs like food banks and school lunch programs.
The S&P 500 has shed 31 points, or 1.1%, to 2,824, as trade war angst ripples across Wall Street.
“The plan we are announcing today ensures farmers do not bear the brunt of unfair retaliatory tariffs imposed by China and other trading partners,” Perdue told reporters in a conference call.
The Dow Jones industrial average also took a dive, shedding 304 points or 1.2% to 25,471. This follows the losses in Europe today, and the 1.8% tumble in China overnight.
“Farmers would rather have trade than aid but without the trade they are going to need some support.”
Investors are increasingly anxious that a “tech cold war” is breaking out between the US and China, after Panasonic froze Huawei out overnight.
China’s call today for America to fix its ‘wrong actions’ has worried investors, and made them realise that the trade war may not end for some time.
Markets slide as Panasonic joins list of firms walking away from Huawei
Marketwatch says:
They’re also concerned by reports that Washington could add more Chinese firms to its blacklist of companies unable to trade with US companies.
U.S. investors are beginning to adjust to the idea of a protracted standoff between the U.S. and China as increased trade friction have continued to weigh on the broader market and the technology sector in particular.
China’s warning that America needs to fix its “wrong actions” if it wants trade talks to resume is also causing jitters.
Weakness in global markets spread to the U.S. as investors digested the implications of new U.S. export restrictions placed on Chinese telecom firm Huawei Technologies Co., with The Wall Street Journal reporting that U.K.-chip design company Arm Holdings was halting business with Huawei, sparking volatility overnight.
The International Monetary Fund has just published a blog, warning that consumers are “unequivocally the losers from trade tensions”.
There’s no relief from the selling on Wall Street, in early afternoon trading.
IMF researchers have analysed price data from the Bureau of Labor Statistics on imports from China, and discovered that tariff revenue collected has been borne almost entirely by US importers.
The Dow is still down just over 400 points, or 1.5%, while the tech-focused Nasdaq is down almost 1.9%.
Not by China, in other words, as Donald Trump keeps claiming. According to the IMF’s findings, Trump is simply wrong.
The news that US factory growth has hit a nine-year low hasn’t cheered traders, who remain anxious about the tech ‘cold war’ breaking out between Washington and Beijing.
They say:
U.S. Secretary of State Mike Pompeo has ratcheted up the pressure on Huawei, dismissing the company’s claim to be independent of Beijing.
There was almost no change in the (ex-tariff) border prices of imports from China, and a sharp jump in the post-tariff import prices matching the magnitude of the tariff.
Pompeo told CNBC that the company is “deeply tied” to China, and also the Chinese communist party.
Some of these tariffs have been passed on to US consumers, like those on washing machines, while others have been absorbed by importing firms through lower profit margins. A further increase in tariffs will likely be similarly passed through to consumers. While the direct effect on inflation may be small, it could lead to broader effects through an increase in the prices of domestic competitors.
“To say that they don’t work with the Chinese government is a false statement. The Huawei CEO - on that, at least - isn’t telling the American people the truth.”
The blog also warns that the existing US-China trade war has already caused damage, and will probably knock 0.3 percentage points of global growth. Things could get worse too....
That’s another sign that relations between the two sides are far from strong.
Failure to resolve trade differences and further escalation in other areas, such as the auto industry, which would cover several countries, could further dent business and financial market sentiment, negatively impact emerging market bond spreads and currencies, and slow investment and trade.
Ouch! European traders have been left reeling from another day of trade war tensions.
#BREAKING IMF warns US-China trade war will 'jeopardize' 2019 global growth
The FTSE 100 has just closed down 103 points, or 1.4%, at 7231. Engineering firm Babcock was the worst performer, shedding 9% - yesterday it warned that profits would be down this year.
Trade war jitters are also pushing the oil price down.
Holiday firm TUI lost 5% -- amid no-deal Brexit worries, and forecasts that more British holidaymakers will stay at home this year (especially given the pound’s recent problems).
US crude has dropped almost 2.5% today to a two-month low, while Brent crude (sourced from the North Sea) has hit a three-week low under $70.
There are heavier losses elsewhere, with Germany’s DAX and Franc’s CAC 40 both losing more than 1.7%.
Weaker economic growth would mean less demand for energy - a blow to oil producers, but good news for consumers.
WTI crude falles below $60 for first time since march - down 2.4% today pic.twitter.com/S2tJUCn1kS
I missed this earlier (sorry!)..... but US factory growth has slumped to its lowest rate in over nine years.
Roberto Azevêdo, director general of the World Trade Organization, has warned that the US-China trade war is hurting the global economy.
Today’s report from Markit (see here) shows that the U.S. Manufacturing PMI fell to just 50.6 this month, from 52.6 in April.
Speaking on CNBC, Azevêdo said that “$580bn of restrictive measures” were introduced in the last year, seven times more than the previous year.
That’s a 116-month low -- helping to drag the overall PMI to a three-year low.
This is holding back investors, this is holding back consumers, and of course it is having an impact on the expansion of the global economy.
Factory bosses have reported that output, employment and inventory stocks have all slowed, while, while new orders fell for the first time since August 2009.
Everyone loses.... every single country will lose unless we find a solution for this.
This all suggests the US economy is stumbling, due to weakness at home and abroad.
"Every single country will lose unless we find a solution for this."U.S.-China trade restrictions are having an impact on the expansion of the global economy at large, WTO chief, @WTODGAZEVEDO says. https://t.co/Y0dsKcxdyj pic.twitter.com/wNe2gQK9xH
Markit says:
Russ Mould, investment director at AJ Bell sums up the day so far:
New orders were stymied by reports of weaker overall demand conditions and hesitancy among clients to place orders.
The markets are not a pretty sight on Thursday with stocks flashing red across the UK, Europe and parts of Asia.
The fall in new business was only fractional, but signalled a marked turnaround from the solid rise seen in April. Data suggested that demand from both domestic and foreign clients declined during the month, as exports also fell.
Investors are spooked by how relations between the US and China seem to be deteriorating, spurred by the US putting Huawei Technologies on a trade blacklist.
US manufacturing activity dives to more than 9-year low on trade war worries, survey shows: https://t.co/DfWSFpgxoF @YunLi626 $SPY $QQQ pic.twitter.com/TIrrUClGq1
And there’s worse to come, when Wall Street opens in an hour...
European stock markets are limping to the close, with heavy losses in London, Frankfurt and Paris:
US Opening Calls:#DOW 25520 -0.95%#SPX 2829 -0.93%#NASDAQ 7325 -1.28%#IGOpeningCall
Nearly every one of the 30 companies which make up the Dow Jones industrial average is in the red today.
However bad things seem, they can always get worse.
Tech firms are leading the way, with IBM down 3% and United Technologies losing 2.6%.
And in the case of the trade war, Donald Trump could create a deeper crisis by imposing additional tariffs on imports of cars from Europe and Japan.
Oil companies are also tracking the slump in the price of crude, with Chevron and Exxon both losing around 2.2%.
The president decided to hold off these tariffs for 180 days last week, but auto manufacturers remain concerned that Trump sees them as as security risk.
Weak economic data from Germany today is helping to pull markets down, says David Madden, market analyst at CMC Markets.
Imposing such tariffs would be a big blow to the global economy, warned economist Willem Buiter of Citi today.
He points to this morning’s PMI report, showing German factories are still shrinking.
Buiter told CNBC that Germany would be particularly badly hit:
European stock markets are suffering today as the US-China trade tensions have increased. There are no planned meetings between both sides, and that is sending out a very negative message. The 90 day delay in relation to the Huawei ban helped stocks at the start of the week, but that now feels like a long time ago.
“If we get in a position of tariffs under the section 232 [national security] act that the U.S. is threatening with, for which it has given a reprieve until November, then that would be serious,”
It appears that all the progress that was made throughout 2019 has gone up in smoke in a few weeks. Adding to the selling pressure was the dreadful manufacturing numbers from Germany. If the powerhouse of Europe is suffering, that is likely to ripple out across the region.
“That would mean tariffs for car imports, for car parts imports, and that would hit Germany the most of any of the large industrial nations. That would be a first-order slap in the economic face,”.
Germany's Manifacturing PMI falls again to 44.3 from previous 44.4 in May, while analysts expected a rise to 44.8. French's business morale is higher, with PMI rising to 50.6, more than expected 50.0. Trade war seems to hit Berlin much more than Paris. @graemewearden
Zhu Huani of Mizuho Bank has warned clients to expect more trade war jitters, as America continues to target Chinese tech firms such as Huawei.
The sight of Wall Street plunging into the red hasn’t helped nerves in the City.
She wrote:
The FTSE 100 is now down 110 points, or 1.5%, while France’s CAC has lost almost 2% of its value.
“The stalemate between the U.S. and China looks likely to last longer as both sides continued to ratchet up rhetoric.
“Despite potential significant negative spillover effect this might have on U.S. firms, the Trump administration seems determined to curb China’s rise in technology advancement.
The US stock market is expected to suffer fresh losses when trading begins in two hour’s time.
The Dow Jones industrial average is tipped to fall by almost 1%, with the broader S&P 500 index called down 0.9%.
Germany’s DAX index is on track for its biggest one-day drop since February, Reuters points out.
Donald Trump’s famous claim that trade wars are “good, and easy to win” is looking increasingly mistaken.
A year on, Beijing has not backed down, and US farmers are suffering the impact of higher tariffs on crucial products such as soybeans.
Harvard professor Jeffrey Frankel has written about how Trump’s trade war has backfired “spectacularly”:
His trade war with China has hurt almost every segment of the US economy and created very few winners. The losers include not only consumers but also firms and the workers they employ, from farmers losing their export markets to manufacturers forced to pay higher input costs. Even the US auto industry, which did not ask for Trump’s “protection”, is worse off overall because it has to pay more for imported steel and auto parts.
As a result, Trump has come close to accomplishing something seemingly impossible: tariffs that benefit almost no one. Protectionism is usually explained as the result of special interests wielding disproportionate power. Trump’s tariffs against Chinese goods do not fit this theory. And a theory that does explain them may not exist.
Trump's trade policy is a hot mess of conflicting goals – with few winners | Jeffrey Frankel
Seema Shah, senior global investment strategist at Principal Global Investors, has warned that the US-China trade war is likely to intensify.
She is sceptical that the impact of the dispute will be limited to only Chinese firms, saying the impact on US business should not be understated.
Several U.S. technology sub-sectors have significant exposure to China via supply chains. For many large U.S. chipmakers, more than 30% of their sales are in China, and for a few that number is closer to 60%. If the U.S. government chooses to roll out this “export control” strategy to more companies, the effect on U.S. tech – and the knock-on effect on the wider market - could be devastating.
But won’t Donald Trump back down, if he sees Wall Street bathed in red? Not necessarily, given wider concerns over China.
“First, when it comes to technology and defence related issues, not only is there a fair degree of consensus across Congress to be tough on China, but many large economies share America’s concerns about China’s practises. Second, U.S. demands around technology and defence will be very difficult to meet given that they are focused on containing China’s aspirations to be a global technology leader, and therefore too existential for China to concede.
“While a compromise on tariffs is still possible, investors should prepare for a longer, more hostile, technology war–with some meaningful collateral damage.”
European stock markets have slumped deeper into the red, as hopes of a trade war breakthrough fade.
Britain’s blue-chip FTSE 100 has now shed more than one hundred points, or 1.35%, in a wide-raging rout.
Germany’s DAX and France’s CAC indices are having an even worse day, down 1.7%, following the losses in Asia overnight.
China’s threat not to resume trade talks with America (see here), the swathe of tech companies ditching Huawei (see here), and rising fears of a no-deal Brexit (see here) are all hitting investor confidence.
The news that eurozone factory output is still shrinking as orders contract (see here) isn’t helping the mood either.
A deepening trade war, and an escalating Brexit crisis, would both hurt economic growth, damage companies across the globe, weaken profits, and hit consumers in the pocket.
Dean Popplewell of trading firm OANDA says investors are much gloomier about the trade war.
U.S equity futures and European bourses are again under pressure, following Asian stocks lower, as Sino-U.S trade tensions show little sign of easing.
The street is now officially worried that what started as a ‘tiff over tariffs’ is turning into a full-blown trade war. U.S Treasuries are steady while the ‘big’ dollar remains King.
Chinese state media are ramping up their criticism of America today too, another sign that the trade war is escalating.
My colleague Lily Kuo reports from Beijing:
An editorial in the People’s Daily on Wednesday accused the US of “bullyism”, while a bulletin on the state broadcaster CCTV said the US was “delusional” if it believed “technological bullying” could contain China. “This shows some American politicians are extremely narrow-minded and cannot tolerate the normal pursuit of development and progress of other countries,” the announcer said.
The harsher sentiments appear to be resonating with the public. Earlier in the week, a song written by a former Chinese official about the trade war, set to the tune of a fight song featured in an anti-Japanese wartime film, had been viewed thousands of times on WeChat.
A clip of a CCTV news segment from last week promising that China would “fight to the end” was one of the top viewed posts on the microblogging site Weibo. And last weekend, a CCTV film channel aired a series of documentaries about the Korean war, when Chinese and US forces clashed. “We are using movies to echo the current era,” the broadcaster said on its Weibo account on Saturday.
'We'll fight to the end': China's media ramps up rhetoric in US trade war
China’s Commerce Ministry has raised the stakes in the trade war with America.
Ministry of Commerce spokesperson Gao Feng has declared that negotiations can’t continue unless Washington changes its position, and amends its mistakes.
He told reporters:
“If the U.S. would like to keep on negotiating it should, with sincerity, adjust its wrong actions. Only then can talks continue.:
Gao then appeared to single out the sanctions on Huawei, saying they are unacceptable:
The U.S. ... crackdown on Chinese companies not only seriously damages the normal commercial cooperation between both countries, but it also forms a great threat to the security of the global industrial and supply chain.
China is firmly opposed to this. We will closely monitor developments and make adequate preparations.”
That sounds like a significant move - is Beijing really refusing to hold fresh talks unless Donald Trump backs down?
China says U.S. is unilaterally escalating trade dispute and impacting trade talks as well as putting a drag on world economy Only if Washington corrects its mistakes and shows sincerity can trade talks continue, MOFCOM spokesman Gao Feng says at Thursday's briefing pic.twitter.com/KQCti8tKqo
Metro Bank shares are a rare bright spot across European markets this morning, up nearly 7%. Its shares have jumped more than 80% since successfully raising £375m in a share placing last week.
But it’s not all good news at the challenger bank, which has been warned it will face renewed pressure to give its chairman the boot:
The fight to oust Metro Bank chairman Vernon Hill isn't over. Shareholder @RLAM_UK confirms it will keep pushing for a “new independent chairman” after 12% of investors voted against his re-election & over 3.5m abstained at last week’s AGM
Royal London Asset Management, which holds a 0.39% stake worth approximately £3.1m, said:
“The high number of votes against directors at Metro Bank’s AGM should send a strong and clear signal that many of the company’s shareholders want to see decisive governance reform.
“We support the move by the board to review the contract with InterArch, the company run by the chairman’s wife. However, we still strongly believe that the appointment of a new independent chairman to lead governance reforms would go some way towards strengthening oversight, and restoring investor and customer confidence in the bank.
“We have communicated our views with the company and will continue to engage with the board over the coming months.”
The bank is still nursing wounds from Tuesday AGM, which attracted protest votes across the board. Every resolution attracted at least 7% of votes against, if not more. You can see those votes here.
Asian stock markets ended the day solidly in the red, after Panasonic ditched ties with Huawei and China warned it would “fight to the end” in the trade war with the US.
Asian markets finished broadly lower today with shares in Hong Kong leading the region. The Hang Seng is down 1.65% while China's Shanghai Composite is off 1.36% and Japan's Nikkei 225 is lower by 0.62%. pic.twitter.com/OlAjBDdn4I
Bad news for Brits heading to Europe this summer -- sterling is continuing its record-breaking losses against the euro.
Brexit anxiety has pushed the pound down by another 0.2% against the euro again to just €1.1307, the lowest since January.
This is its 14th day of losses in a row - its worst-ever run.
