Munich, Germany Photograph: Murat Taner/Getty Images
And finally, UK stocks have ended the day in the red.
The FTSE 100 index has closed 63 points lower at 6,855, down 0.9%.
Worries over China’s slowing economy, and the threat of a eurozone recession, weighed on markets. Germany’s DAX and France’s CAC both shed around 0.4%.
Donald Trump’s optimism over a China trade deal (see here) hasn’t prevented shares dropping on Wall Street.
The Dow Jones industrial average is down 110 points, or 0.46%, at 23,885 points.
The Nasdaq has shed almost 1%, amid worries that tech companies will suffer from China’s slowdown.
David Madden of CMC Markets says China’s weak December trade data has hurt morale:
The major indices are lower today as sentiment has been soured by the Chinese trade figures. The fall in Chinese exports will be welcomed by the Trump administration as it will be seen as a sign that the trade war strategy is working. Also, the gloomy import numbers show that the Chinese economy is slowing, and that might prompt Beijing to soften its stance with regards trade relations.
Full story: Global economy fears grow
Today’s gloomy trade and factory output data has given investors plenty to worry about, as my colleague Richard Partington explains:
Fears are growing over the state of the global economy after China recorded a shock plunge in exports, while European factory output slumped by the biggest margin in almost three years.
In a sign of the world economy reaching a tipping point, official figures showed that Chinese exports dropped by 4.4% in December, in the largest fall since 2016, on the back of faltering demand in most of its key markets. Imports also slipped by 7.6% to reflect waning demand at home.
The unexpected downturn for the biggest global exporter of manufactured products came as eurozone industrial output also tumbled in November, with the largest drop in factory activity since February 2016.
The EU statistics office, Eurostat, estimated industrial production slipped by 1.7% in November compared with the previous month and by 3.3% on the year, reflecting the struggles facing several European economies in recent months.
Financial markets around the world sold off sharply on Monday, with the FTSE 100 shedding about 70 points and losses on bourses across Europe.
Reminder: The US and China only have until the end of February to reach a trade deal.
Otherwise, president Trump will hike the tariff on over $200bn of Chinese imports from 10% to 25%, probably triggering fresh retaliation from Beijing.
US officials are continuing to work, despite the US government shutdown, reports journalist Edward Lawrence.
On China: President Trump believes that we will get a deal. US Trade Sources say even though the USTR is out of money today.. negotiators working without pay. Chinese have been briefed that the shutdown will not affect timeline. March 1st is deadline or increased tariff's added.
— Edward Lawrence (@EdwardLawrence) January 14, 2019
Trump: We'll reach a trade deal with China
Newsflash: Donald Trump has predicted that the US and China will reach a deal to end the trade war.
Speaking to reporters in Washington, the US president claimed that his official are winning concessions that previous administrations would have been laughed at for requesting.
Trump said that China is suffering hard times due to the tariffs on goods sold to America, adding:
China wants to negotiate.... I have a great relationship with president Xi.
Elsa Lignos of RBC Capital Markets has dug into today’s Chinese trade slowdown data.
She’s spotted that imports from the US slumped by a third in December, while imports from Brazil surged.
She writes:
Unsurprisingly, China’s imports from the US have been hit hardest – flat in September, -2%y/y in Oct, -25%y/y in Nov and now -36%y/y in December (-$6bn) and Brazil appears to be the major beneficiary, with Chinese imports up over 40%y/y (+$2bn).
US bank Citigroup has shown the impact of last autumn’s market turmoil.
Citi kicked off the Wall Street bank reporting season by revealing that income at its fixed-income arm (bond trading) slumped by a fifth in the last quarter of 2018.
That helped to pull overall Q4 revenue by 2% to $17.1bn, below forecasts of $17.5bn.
CEO Michael Corbat blamed market turbulence, which drove many clients to the sidelines, saying:
“A volatile fourth quarter impacted some of our market-sensitive businesses.
CFO John Gerspach has told reporters that conditions have improved in January, adding that the slowdown in China has not been particularly disruptive.
Citi CFO on Q1 trading: "We have seen improvements in trading conditions, volatility has somewhat moderated both equity prices and yields have shown sign of stabilisation."
— Laura Noonan (@LauraNoonanFT) January 14, 2019
If you’re just tuning in, here’s a chart showing the weak Chinese trade data that spooked markets overnight (exports down 4.4% in November, imports down over 7%).
"China’s exports slumped in December as a rush of orders to beat expected tariffs showed signs of fading and as domestic buyers succumbed to a worsening economic outlook."https://t.co/7cep0UpMI7 pic.twitter.com/stRfpqiQPJ
— Jonathan Ferro (@FerroTV) January 14, 2019
The US stock market is expected to drop around 1% when trading begins in 70 minutes time.
The surprise drop in Chinese exports and the worse-than-expected eurozone factory output, is weighing on Wall Street - as the US government shutdown drags on.
US Opening Calls:#DOW 23793 -0.83%#SPX 2574 -0.82%#NASDAQ 6534 -1.02%#IGOpeningCall
— IGSquawk (@IGSquawk) January 14, 2019
In London, the FTSE 100 is still in the red (currently down 60 points at 6855).
Connor Campbell of SpreadEx sums up the day so far:
Europe’s Chinese concerns only ramped up as Monday went on, with the Dow Jones set to fret after the bell rings on Wall Street.
Given that the commodity sector is rightly edgy every time some bad news comes out of Beijing, it stands to reason that the oil and mining-heavy FTSE was the worst hit of the major indices. As Brent Crude lost 1.5%, and copper dropped 1.3%, the FTSE fell back under 6850 thanks to a 1% slide, the likes of BP, Shell, Anglo American and Antofagasta causing the brunt of the decline.
Simon Rabinovitch of The Economist has pointed out that the US-China trade gap has widened substantially since Donald Trump became president:
Caveats aplenty: strong US imports reflect strong US growth; weak Chinese imports reflect China's slowdown; some Chinese exports were front-loaded before feared tariffs. All of which is to say: this is a fine reminder of the foolishness of Trump's focus on the bilateral deficit.
— Simon Rabinovitch (@S_Rabinovitch) January 14, 2019
Political turmoil in Greece has intensified.
The confidence vote called by prime minister Alexis Tsipras following the withdrawal from office of the Independent Greeks party, will now take place on Wednesday afternoon.
The uncertainty has caused shares on the Athens stock market to fall, amid investor fears that the uncertainty could lead to early elections, reports our correspondent Helena Smith in Athens.
Bank shares dropped 3.8% this morning as investors digested the spectre of renewed political instability in the euro zone’s most fragile member state.
Much will depend on how Tsipras “interprets” the vote which analysts believe he will win – if by a slim margin.
In true Trumpian style, the Independent Greeks leader Panos Kammenos resorted to Twitter this morning to expel two of his MPs, including Elena Kondoura, the tourism minister, from his party’s ranks after both confirmed that they will be backing Tsipras in the confidence vote- and the looming Macedonia name change deal which prompted the nationalist politician to withdraw from the leftist-led coalition.
“Mrs Kontoura, with an official announcement, decided to exchange her vote and the name Macedonia for the ministerial chair. I am expelling her from AN.EL’s parliamentary group,” the tweet read.
Alastair Neame, senior economist at the Centre for Economics and Business Research, says eurozone manufacturers are struggling as the global economy slows,
As a major exporter, the state of the global economy matters to Eurozone manufacturers. The trade dispute that erupted during the summer between the US and China has dragged down global trade growth and has spilled over into wider supply chains.
Although temporary factors like new emissions standards may be affecting car production, the rise of protectionism and uncertainty are likely to have a long lasting impact on the sector’s fortunes.“
OECD: Most major economies are slowing
Newsflash: The OECD thinktank has just warned that growth momentum is “easing” in most major economies.
In a new assessment of the world’s largest economies, the OECD says the biggest declines coming in France and Britain.
The OECD said its composite leading indicators, gauges of economic activity that are designed to anticipate turning points relative to past performance for between six to nine months ahead, also showed easing growth momentum in the US, Germany, Canada, Italy and the euro area as a whole.
The Paris-based thinktank says:
In the United States and Germany, the tentative signs of easing growth momentum, that were flagged in last month’s assessment, have been confirmed with easing growth momentum remaining the assessment for Canada, the United Kingdom and the euro area as a whole, including France and Italy.
The OECD adds that Brazil appears to be slowing (after a period of growth) while China is now experiencing “stable growth momentum” (after a downturn).
European stock markets have fallen deeper into the red, following the disappointing fall in eurozone factory output.
Britain’s FTSE 100 is now down 66 points, or almost 1%. Italy’s FTSE MIB has shed 1.25%, while Germany’s DAX is 0.75% lighter.
Updated
ING: Recession fears are mounting
Bert Colijn, senior eurozone economist at Dutch bank ING, fears that some of Europe’s largest economies could suffer a recession soon.
He says November’s decline in industrial production sinks hopes that growth picked up at the end of 2018:
Fears of a technical recession in large Eurozone economies are mounting as industrial production in November provided a harsh reality-check for economists.
The third quarter slowdown to just 0.2% GDP growth was expected to be followed by a bounce back in Q4, but the evidence is mounting that this is unlikely. Surveys have been dismal throughout the quarter, and actual production data is now confirming that bleak view on the Eurozone economy. Industrial production declined by -1.7% month-on-month in November and by -3.3% compared to November last year.
Consumption looks to have performed somewhat better, but concerns about a technical recession in Germany and Italy are nonetheless rising.
A “technical recession” is defined as two consecutive quarters of negative growth. Both Germany and Italy contracted in the third quarter of 2018 (by 0.2% and 0.1% respectively), so they’re halfway there already....
This sharp fall in eurozone industrial production suggests the world economy faltered in the last few months, warns Teis Knithsen of Kirk Kapital:
Something happened to the global economy in Q4 #1: Euro area industrial production fell by 1.7% in November, down 3.3% y/y. pic.twitter.com/RbGDznRMw1
— Teis Knuthsen (@TeisKnuthsen) January 14, 2019
Ireland suffered the biggest drop in industrial production in November, down by 7.5% month-on-month.
That was followed by Portugal (-2.5%), and Germany and Lithuania (both down 1.9%).
#Eurozone industrial production in November is worse than expected, and expectations were pretty bad pic.twitter.com/DGbvdfC78y
— Valentina Romei (@valentinaromei) January 14, 2019
On an annual basis, eurozone industrial production was 3.3% lower than in November 2017 - a hefty fall.
Updated
Eurozone industrial productions takes a tumble
Newsflash: Factories across the eurozone have suffered their biggest plunge in output in almost three years, in another sign that the world economy is slowing.
Industrial production across the euro area shank by 1.7% in November, data body Eurostat just reported.
That’s the worst decline since February 2016, and worse than expected (economists had been braced for trouble, after weak data from Italy, Germany, France and Spain last week).
The slump is broad-based, with production of heavy duty goods and consumer products both sliding.
Eurostat says:
In the euro area in November 2018, compared with October 2018, the production of capital goods fell by 2.3%, durable consumer goods by 1.7%, intermediate goods by 1.2%, non-durable consumer goods by 1.0% and energy by 0.6%.
In the EU28, the production of capital goods fell by 1.6%, intermediate goods by 1.1%, durable consumer goods by 1.0%, non-durable consumer goods by 0.6% and energy by 0.5%.
This is likely to fuel concerns that the eurozone economy is slowing, and could even suffer a recession in 2019 (Germany, its latest member, suffered a 0.2% drop in GDP in July-September 2018).
More to follow....
Updated
Patrick Zweifel, chief economist at Pictet Asset Management, argues that China needs to strike a trade deal quickly, and also implement more growth-friendly policies.
. #China export growth plunged in Dec (Y/Y) while momentum gradually declined further, reaching a pace in line with what export orders would point to in 5-month time
— Patrick Zweifel (@PkZweifel) January 14, 2019
. 2 implications for Beijing: i) more eager to strike a deal ii) more aggressive measures to stabilise growth pic.twitter.com/LIgV6cd0DH
This chart highlights how China’s export growth took a tumble last month, with the worst decline in two years:
Economists: China's domestic economy is slowing
China’s economy will probably slow sharply this year, taking a bite out of global growth, reckons Neil Shearing of Capital Economics.
He writes:
Both fiscal and monetary policy have been loosened over the past few months and this should start to feed through to the real economy by the second half of this year. However, the scale of the stimulus so far has been more limited than in 2015-16, and the effect on activity is likely to be correspondingly smaller.
All of this means that, while China’s economy isn’t facing an imminent collapse, neither is it in a particularly good place. Growth in 2019 is likely to be weaker than in 2018 and this will play a significant role in the coming global slowdown. We estimate that slower growth in China will shave about 0.2%-points off world GDP growth this year compared to 2018.
Shearing also argue that the slowdown is primarily due to “domestic headwinds” – including tighter credit conditions – rather than the US trade war.
Independent economist Shaun Richards agrees:
Another worrying sign for the economy of China as exports fell 4.4% year on year in December and even worse imports fell 7.6% as that hints at a domestic slowdown.
— Shaun Richards (@notayesmansecon) January 14, 2019
The money supply data in China confirmed the overall weakening trend seen in 2018 albeit a minor bounce was seen as M2 growth rose from 8% in November to 8.1% in December
— Shaun Richards (@notayesmansecon) January 14, 2019
European stock markets have all fallen in early trading, as China’s weak trade performance last month spooks investors.
In London the FTSE 100 has dipped by nearly 30 points, or 0.4%. Mining stocks are among the fallers, reflecting concerns that Chinese demand for iron ore, copper etc is fading.
Across Europe, luxury goods makers are also under pressure, as China is a key growth market for many. LVMH (Moët Hennessy Louis Vuitton) is down 2%, while Prada has lost 5%.
Today’s trade data also shows that China’s soybean imports fell by 7.9% during 2018.
That’s the first annual drop since 2011.
China imposed tariffs on US soybeans last year, in response to US tariffs on its goods.
That was a blow to American soybean farmers, for whom China was a crucial markets, and helps explain how China’s trade surplus with the US actually grew last year.
Updated
Ophir Gottleib of financial analyst group Capital Market Laboratories argues that its time for Washington and Beijing to end the trade war, before the situation worsens.
Breaking News
— Ophir Gottlieb (@OphirGottlieb) January 14, 2019
* China's exports were *down* 4.4%🚨 year over year for Dec vs estimates of *up* 5.4% (@Selerity )
* China to U.S. current account balance largest in more than a decade for 2018.
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Opinion: Trade War has a reason to end.
Copper and aluminium prices are falling today, as China’s weak trade figures spook the sector.
Stephen Innes of trading firm OANDA says:
The December trade figures are hammering commodity markets lower as this data drives home just how negative of an impact trade war is having on the Chinese economy, and perhaps the global economy too.
Investors are alarmed by the 4.4% tumble in China’s exports last month, says Naeem Aslam of Think Markets:
He fears Donald Trump’s trade war is bringing the Chinese economy to its knees.
The Chinese trade numbers released today got all the alarm bells ringing once again.
If you ever need any evidence that how the trade spat can impact the country’s economic health then this number is clearly a major factor here. The lower export number also means that lower jobs which means another direct impact on the economy.
Donald Trump may be pleased to see these numbers because it shows that his policies have clearly brought China to its knees. Clearly, Beijing must do something to put a stop to this chaos. President Trump may actually beat his chest even more by looking at the fact that China’s trade surplus with the US is at a 10-year high.
Updated
China-US trade surplus hits record high
What was that about trade wars being “good and easy to win”, Mr President?
Despite exports slumping in December, China’s overall trade surplus with the US for 2018 swelled to $323bn — the highest on record.
Reuters has the details:
Exports to the U.S. rose 11.3% on-year in 2018, while imports from the U.S. to China rose a meagre 0.7% over the same period.
China’s overall trade surplus for 2018 was $351.76 billion, the government said. Exports in the whole of 2018 rose 9.9% from 2017 while imports grew 15.8% over the same period, official dollar-denominated data showed.
That will not please Donald Trump. It shows that his policy of imposing tariffs on Chinese goods hasn’t narrowed the lopsided trade gap.
That’s partly because the trade dispute has weakened the yuan against the US dollar, cushioning the impact of Trump’s tariffs (and making US goods less competitive in China).
China's December trade figures worry markets
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Worries over the health of the global economy are sweeping through the markets today, after China reported a sharp drop in trade last month.
Chinese exports shrank by 4 .4% year-on-year in December, official data shows, much worse than economists had expected.
That’s the worst decline in two years, indicating that global demand has been hit by the trade dispute between Beijing and Washington.
Imports slumped by 7.6% year-on-year, which also suggests the world’s second-largest economy is struggling.
Analysts had expected export growth to slow to 3% with imports up 5% year-on-year, according to Reuters data. It’s the latest signal that China’s economy could be stumbling; we already knew that car sales fell in 2018, and that factory output shrank in December.
Zhou Hao, an economist with Commerzbank AG in Singapore, says the trade data shows a “clear downward trend”, adding:
“This is not just due to the trade war and tariffs. On top of those, the major drag is slowing global demand.”
Asian stock markets have fallen into the red today, with China’s Shanghai Composite Index down 0.7%. Europe is also expected to open lower, as Michael Hewson of CMC Markets explains.
This morning’s numbers showed that far from improving the trade picture deteriorated further with exports declining 4.4%, as the global economic picture became more worrying. Much more concerning for an economy supposedly rebalancing away from big industry the import data slowed as well, reflecting a sharp slowdown in internal demand sliding 7.6%, missing expectations of a 4.5% rise.
Disappointment over this mornings data has seen Asia markets slip back and will see European markets open lower this morning.
Chinese trade slumped in December as trade war hit, though the picture for the whole of 2018 was rosier:
— Bloomberg (@business) January 14, 2019
-exports rose by 9.9% in 2018 in dollar terms to $2.48 trillion
-imports surge 15.8%, leaving trade surplus of $351.8 billion https://t.co/2jFh8oyXkO
Also coming up today
The pound could be volatile, as Theresa May launches a last-gasp effort to persuade MPs to back her Brexit bill ahead of Tuesday’s vote (which she’s still expected to lose heavily).
- UK Cabinet Ministers are reportedly exploring "Plan B" options with PM May expected to lose her Brexit vote on Jan 15
— RANsquawk (@RANsquawk) January 14, 2019
UK retailer Debenhams is locked in a battle for survival after its biggest shareholder, Mike Ashley of Sports Direct, forced its chairman out last week. There are fears that a rescue package could cost thousands of jobs.
Greece faces fresh political instability, after the right-wing Independent Greeks party pulled out of the country’s coalition government in a row over Greece’s naming deal with neighbouring Macedonia. Prime minister Alexis Tsipras now faces a confidence vote in parliament later this week.
That’s not what the eurozone needs, on top of its slowdown worries. New industrial production figures due this morning are likely to be poor.
The agenda
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10am GMT: Eurozone industrial production data for November
Updated
