And finally, European stock markets have also racked up gains today, as trade war fears faded.
Britain’s FTSE 100 index gained 36 points to close at 7367, up 0.5%.
There were bigger gains in France and Germany, as traders watched Wall Street soar to record levels.
Over in New York, the Dow continues to rally. It’s currently up 257 points or 1% at 26,662, on track for a record close.
Connor Campbell of SpreadEx says:
With investors choosing to view the current state of play between the US and China as a smidge better than initially feared, the Dow Jones led a substantial charge higher on Thursday.
Despite the recent tit-for-tat tariff attacks between Beijing and Washington, Trump’s accusations that China is trying to undermine US democracy, AND the rather high likelihood that the Federal Reserve will raise rates next Wednesday, the Dow Jones managed to hit an all-time peak after the bell rang on Wall Street.
The oil price continues to slide, following Donald Trump’s call for Opec to take action this weekend. Brent crude is down almost 1% at $78.75 per barrel, while US crude has dipped by 0.3% to $70.92.
That’s all for today. Thanks for reading and commenting. GW
Industrials and tech drive Dow Jones to record high
Today’s record highs on Wall Street suggest investors are less worried about a US-China trade war.
Chemicals company DowDuPont is leading the way, up 2.2%, followed by chipmaker Intel (+2%), software giant Microsoft (+1.7%) and construction machinery maker Caterpillar (+1.5%).
David Madden of CMC Markets says traders are relieved that the US and China didn’t take more punitive measures this week:
The rally has returned as the Dow Jones and S&P 500 have set fresh record highs. The latest round of tariffs that were announced during the week weren’t as severe has some traders were anticipating, and the market has breathed a sigh of relief.
The fear of new tariffs proved to be worse than the tariffs themselves, and even though the US and China now have a worse trading relationship, dealers are still optimistic as there is no sign of additional tariffs in sight.
Economists: No-deal Brexit would cause UK recession
Brexit continues to loom over the City, after European council president Donald Tusk warned that Theresa May’s Chequers deal won’t work.
The lack of a breakthrough at today’s leaders’ summit in Salzburg may increase the risk that Britain leaves the EU without a deal.
How bad would that be?
Oxford Economics warn it would create a “significant slowdown”, with the pound tumbling and trade hit by new barriers. They reckon 2% would be knocked off the UK economy by 2020:
No-deal Brexit would hit UK economy hard, with level of GDP 2.1% below where it would otherwise be at end of 2020, estimates @OxfordEconomics. Irish GDP would be 1.4% lower than forecast, but interestingly, the big 5 euro zone countries' GDP no more than 0.3% lower. pic.twitter.com/Puu77D4CBs
— Jamie McGeever (@ReutersJamie) September 20, 2018
Deutsche Bank are even more gloomy. They believe the UK would be tipped into a two-year recession, wiping 4% off GDP, as household consumption and business spending both shrink.
Deutsche goes there.
— Katie Martin (@katie_martin_fx) September 20, 2018
Forecasts for a 'crash Brexit':#sunlituplands pic.twitter.com/oL10u4dm6x
President Trump has moved on from rebuking Opec, to welcome today’s stock market rally:
S&P 500 HITS ALL-TIME HIGH Congratulations USA!
— Donald J. Trump (@realDonaldTrump) September 20, 2018
Donald Trump’s dislike of higher oil prices is well known -- he fears they will hurt US consumers by driving up the cost of gasoline.
But Charles Bond, natural resources partner at law firm Gowling WLG, suggests the president should see the bigger picture, rather than fire tweets at Opec.
“Trump’s motive here is clearly to bring the price of oil down but that may have a wider effect in transactional terms.
The recent return to higher oil prices has meant that companies in the sector globally can start to benefit from capital investment again and the benefits that come with it, such as business expansion and increased economic activity. Any artificial attempt to stem this would need to be balanced very carefully given the likely consequences for the wider industry.”
Here’s our latest take on the Danske Bank money-laundering scandal:
Donald Trump has also channeled his inner Norman Tebbit today, by telling Americans to take advantage of the strong labor market and look for a better job.
The S&P 500, which covers a wider range of companies than the Dow, has also hit a record high in early trading.
S&P 500 hits record high pic.twitter.com/tWRgwDDpC3
— Jamie McGeever (@ReutersJamie) September 20, 2018
Dow hits record high pic.twitter.com/kf7cGb1Kvt
— Jamie McGeever (@ReutersJamie) September 20, 2018
Dow hits new all-time high
Boom! America’s Dow Jones industrial average has hit a new all-time high.
Shares have jumped at the start of trading in New York, sending the Dow up by over 230 points to 26,643 points.
That takes the index over its previous record, set in January this year (just as Donald Trump was speaking at Davos).
Technology stocks are driving the index higher. There is also optimism that the US-China trade war could be resolved -- earlier today, Beijing argued that talks, not tariffs, were the solution.
Shares are also benefitting from the recent weakness of the US dollar, which has dropped to its lowest level since July today.
BREAKING: Dow hits first record high since January https://t.co/jx67sl6ys5 pic.twitter.com/g0HoU9KT2G
— CNBC Now (@CNBCnow) September 20, 2018
Dean Popplewell, vice president of Market Analysis at OANDA, points out that oil stockpiles have been falling recently, helping to underpin prices.
EIA data Wednesday showed that U.S crude oil stockpiles fell for a fifth consecutive week to a three-year low in the week to Sept. 14, while gas stocks also showed a larger than expected draw on unseasonably strong demand.
Crude inventories fell by -2.1m barrels, compared with expectations for a decrease of -2.7m.
OPEC and other producers, including Russia, meet on Sunday in Algeria to discuss how to allocate supply increases to offset the loss of Iranian barrels.
Donald Trump’s claim that Opec is a ‘monopoly’ doesn’t really stand up to scrutiny.
The countries which make up Opec produce around 40% of the world’s crude oil, and around 60% of the total petroleum traded internationally. So it’s big enough to influence the market, but it doesn’t control the whole thing.
The president would have been on stronger ground if he’d called Opec a cartel -- there’s no argument that it agrees production levels in an attempt to influence the oil price.
But... the more Opec pushes the oil price up, the more profitable America’s shale oil industry becomes....
OPEC monopoly? So the US shale business no longer exists? https://t.co/AARTRjcl2n
— Paul R. La Monica (@LaMonicaBuzz) September 20, 2018
What a difference a tweet makes.
Brent crude has fallen by one dollar per barrel since Trump’s tweet, from almost $79.75 per barrel to below $79.
Some traders may have concluded that Trump’s intervention raises the chances that Saudi Arabia pushes for an increase in output at this weekend’s Opec meeting.
Donald Trump appears to be trying to prevent the oil price rising over $80 per barrel.
Bloomberg’s James Herron explains:
Trump’s fresh intervention in the oil market comes before a meeting of ministers from the Organization of Petroleum Exporting Countries and its allies in Algeria on Sunday.
His complaint follows signals from Saudi Arabia that it was content to see prices climb above $80 a barrel. That’s been a red line for the White House in the past, provoking the president to direct his first social-media barb against the cartel since July 4.
Trump’s goes after OPEC before its meeting on Sunday. His complaint follows signals from Saudi Arabia that it's content to see prices climb above $80 a barrel. That’s been a red line for the White House in the past.@ja_herronhttps://t.co/t4PEWWnRXP
— Jennifer Jacobs (@JenniferJJacobs) September 20, 2018
Trump: Opec must get prices down
Boom! The US president has demanded that the OPEC oil cartel take action to bring the oil price down.
Donald Trump has tweeted that Middle Eastern countries aren’t showing sufficient gratitude for America’s military support, by pushing crude prices to their current levels.
We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!
— Donald J. Trump (@realDonaldTrump) September 20, 2018
That’s a clear nudge to Opec members, such as Saudi Arabia, to agree a production boost when they meet this weekend.
Brent crude is currently trading near to $80 per barrel, close to its highest level since November 2014.
Oil prices have been climbing sharply since Opec agreed a historic deal to curb production in late 2016. That output freeze has helped to remove over-capacity from the market, meaning producers benefit from higher prices.
Opec members will meet with non-Opec countries, such as Russia, over the weekend to examine their production quotas.
Oil analysts believe they are unlikely to lift production limits, despite pressure from America.
Iran, for example, has indicated it is happy with oil at $80 per barrel, so would presumably oppose a production increase. Tehran also doesn’t enjoy military protection from the US, of course, so Trump’s threat may not carry much weight.
Iran’s oil production is likely to drop as US sanctions kick in.
That creates a new dilemma for Opec, as one source told Reuters:
“It’s complicated. Saudi Arabia has to balance oil supply and demand, and it has to balance oil prices so they don’t rise too much before the U.S. elections,.
“It’s also political because the Saudis don’t want to pump too much oil then the Iranians complain to OPEC that it (Saudi Arabia) is taking (Iran’s) market share. They also don’t want oil prices to fall too much.”
Uh oh. Sky News are reporting that high street bicycle chain Evans Cycles is looking for a new buyer, as the “toxic” retail environment threatens to claim another victim.
Clearly the upturn in retail spending last month hasn’t given Evans much of a boost. More here.
Exclusive: Century-old retailer Evans Cycles seeks takeover bids within days as the UK’s brutal high street environment threatens to claim another prominent victim. https://t.co/P5sglNVvd5
— Mark Kleinman (@MarkKleinmanSky) September 20, 2018
Ryanair investors demand changes after revolt
Ryanair investors are calling on the budget airline to heed today’s revolt at its AGM.
Campaign group ShareAction says the fact that nearly one in three shareholders fail to back chairman David Bonderman is proof that change is needed, following a year marked by pilot strikes.
Mara Lilley, senior campaigns officer at ShareAction, says:
“It might not sound like it, but 30% of Ryanair shareholders wanting to oust Bonderman – up from 11% last year – is a clear signal that business cannot and must not continue as usual. His cosy relationship with O’Leary has allowed the chief executive to get away with tantrums in the face of serious workforce issues and poor industrial relations which will end up hitting profits.
We predict next year Bonderman’s long-haul tenure will finally come to a well-deserved end.”
Alison Kennedy of Aberdeen Standard Investments made a similar point at the AGM.
Although ASI backed Bonderman, and independent director Kyran McLaughlin today, their patience is running thin.
Kennedy warned:
Given the challenges the company faces, for example in union and labour relations, it is clear that governance needs to evolve. Strong, independent and visible board leadership is more important than ever. So, we expect that there will be clear progress on succession for these two key board positions by the time of the AGM next year.
If not, others things being equal, we will vote against the re-election of Mr Bonderman, Mr McLaughlin and the other members of the Nominations Committee.
Drinks giant Diageo, whose tipples include Johnnie Walker, Baileys and Smirnoff, says today that it has been hit by the recent turmoil in emerging market currencies.
This is expected to reduce sales by £175m and cut operating profits by £45m in the year to 30 June, the company reported today.
Updated
EC condemns Danske Bank over money-laundering
Money laundering at Denmark’s biggest bank is “the biggest scandal” in Europe and could prompt action from regulators in Brussels, the European commission has said.
Věra Jourová, the European commissioner for justice, said she wanted to know if a failure of banking supervision led to lapses that allowed €200bn (£178bn) of illegally-laundered funds to flow through Danske Bank’s Estonian branch.
The bank’s chief executive, Thomas Borgen, resigned on Wednesday, after admitting the bank had failed “to live up to its responsibilities”, allowing dirty money to flow out of Russia, the UK and the British Virgin Islands, through its Estonian branch.
The commissioner will meet ministers from Denmark, Estonia and Finland on 2 October to investigate what went wrong.
“I want to understand better where the main errors happened, whether it was purely a fault of the due diligence done by the bank itself, or whether there was some mistake of the supervisory authority,” Jourová told reporters.
“This is the biggest scandal, which we have now in Europe, which is also a very unpleasant lesson, which shows the need to be much more vigilant and much more prudent in checking.”
If there had been a mistake in supervision, she said, “we will have to act”.
The European Banking Authority, an EU agency based in London, tightened controls on Malta’s Pilatus Bank, after its Iranian owner was charged by US authorities with evading sanctions and money laundering.
The commissioner said action by the EBA had led to “precise results” on Pilatus bank. But EU authorities want more powers for the agency: last week the commission called for the EBA to be able to order national authorities to tackle suspected money laundering.
In a rather unusual move, the long-running battle to take control of UK broadcaster Sky will go to an auction this weekend.
The Takeover Panel has decided that Rupert Murdoch’s 21st Century Fox, and rival bidder Comcast, should each make new bids in a three-round contest. Each can choose to raise their offers (currently £14 and £14.75 respectively).
This will resolve the uncertainty that has been swirling over Sky since December, when Fox attempted to buy the 61% of Sky which it doesn’t already own. With neither side making a final offer, this auction should resolve Sky’s fate.
This rise in UK retail spending is a little hard to square with the gloomy picture on UK high streets.
Last week, for example, John Lewis reported that its profits had been virtually wiped out in the last six months.
House of Fraser fell into administration in August, while Debenhams warned that “underlying trends deteriorated through the summer months.”
Hardly a rosy picture...but yet the ONS believes consumers are still spending.
Given that inflation is rising, and wage growth has been modest, some consumers may be falling into deeper debt to sustain this spending.
Josie Dent, Economist at the CEBR think tank, believes a squeeze is coming:
While today’s headline figure paints a rosy picture for retail, more timely indicators show that the high street is struggling this month.
John Lewis Partnership figures for last week show that the total value of sales was 2.2% lower than the same week a year ago, while for their financial year-to-date, sales are down 0.5% on the same time period last year.
Today’s report also confirms that the unusually warm weather - and unusually successful England football team - boosted spending.
The ONS says:
Household goods stores also reported strong growth during the summer of 5.8% compared with a fall in the previous year, with anecdotal evidence from retailers suggesting that the FIFA World Cup had boosted sales of televisions alongside the positive impact of the warm weather.
Food sales also did well with the good weather when compared with the previous summer, with a growth of 3.2% in comparison with a fall of 0.7% in summer 2017.
August’s retail sales are a “mixed bag”, argues Tom Stevenson, investment director for Personal Investing at Fidelity International.
He points to the drop in clothing and food sales, as a sign that consumers are feeling the pinch:
“The headline level of retail sales data was unexpectedly strong for August, although buoyant household goods volumes were offset by declines in food, clothing and petrol.
Food and clothing retreated after benefiting from the unusually warm weather in July. The rising cost of fuel is also starting to bite. So this is a mixed bag, which paints an unconvincing picture of recovery on the UK’s struggling high streets.
Strong online sales suggest that far-reaching structural changes in UK retail continue apace.
Sam Tombs of Pantheon Economists reckons this spending splurge won’t last:
Above-consensus UK retail sales in August were driven by a surge in household goods sales. Given the dearth of housing market activity, the surge does not look sustainable: pic.twitter.com/otXPatyWXN
— Samuel Tombs (@samueltombs) September 20, 2018
Today’s forecast-beating retail sales figures suggest the UK economy grew robustly in the last quarter, says economist Howard Archer of the EY Item Club:
Healthy #retail sales in August fuels belief that #UK #economy is on course to grow at least 0.5% q/q in Q3. #Consumer spending buoyed in Q3 by heatwave & football World Cup. Economy likely to find Q4 tougher with heightened #Brexit uncertainties fueling business caution https://t.co/3ZLSrY1qIB
— Howard Archer (@HowardArcherUK) September 20, 2018
Here’s more details:
The surprise rise in UK retail sales last month has pushed the pound back to $1.32, a gain of half a cent.
UK retail sales smash forecasts
Newsflash: UK shoppers kept spending in August despite rising inflation and worries over Brexit.
Retail sales volumes (the amount of stuff people bought) rose by 0.3% in August compared with July, the Office for National Statistics says. That beats forecasts of a 0.2% decline.
The ONS says that household goods sales jumped by 4.5%, while other non-food stores enjoyed a 2.8% rise.
However, food sales dropped by 0.6% and clothing fell by 1.9%.
Yesterday we learned that UK inflation jumped to 2.7% in August, from 2.5% in July, partly due to a jump in clothing and transport costs. This doesn’t seem to have dampened demand for goods, though.
On an annual basis, sales in June-August were 3.4% up than a year earlier - partly thanks to the summer heatwave.
Office for National Statistics senior statistician, Rhian Murphy, says:
“Retail sales remained strong in the three months to August, with continued growth across all sectors. Food and household goods stores particularly benefitted from the warm weather when compared with last summer.
“The figures for the month of August were a little more mixed, with food sales falling after strong sales earlier in the summer and clothing sales declining following a strong July, as suggested by clothing retailers. On the other hand, household goods grew strongly.”
Alibaba's Jack Ma backs down from 1 million jobs pledge
Back to the US-China trade war, and billionaire Jack Ma has ditched his goal of creating a million new jobs for Americans.
Ma blamed the rising protectionist conflict between Beijing and Washington, saying the lack of friendly relations make the pledge unviable.
Jack Ma, founder and chairman of Chinese retail giant Alibaba, says the company no longer plans to create 1 million jobs in the United States in the wake of the ongoing trade conflict between the U.S. and China.
Ma made his original job creation pronouncement during a high-profile meeting with Donald Trump in January 2017 before Trump’s inauguration as president.
“The promise was made on the premise of friendly US-China partnership and rational trade relations,” Ma told Chinese news site Xinhua on Wednesday. “That premise no longer exists today, so our promise cannot be fulfilled.”
Ryanair’s AGM is underway.
In a surprise twist, the airline lifted its ban on journalists attending (just as well, as hacks were congregating outside anyway).
Media waiting as @Ryanair AGM to get underway this morning. Media banned feom attending. #aviation pic.twitter.com/RYZ6dkO7WD
— John Mulligan (@JMulliganIndo) September 20, 2018
Ryanair is now revealing the results of the shareholder votes.
Founder Michael O’Leary is re-elected with 98.5% support from proxy votes (votes made in advance by investors).
But there’s a rebellion against the chairman; only 70.5% of votes are cast in favour of David Bonderman’s re-election.
Independent director Kyran McLaughlin received just 66.8pc of votes in favour of his reappointment.
Major investor Aberdeen Standard is now warning that Ryanair needs a proper succession plan, or it will rebel next year too.
Representative of Aberdeen Standard Investments tells Ryanair agm that board needs succession plans for chairman/senior independent director next year or will vote against reelection then. Voted in favour this year. Large enough vote against David Bonderman and Kryan McLaughlin
— Ian Guider (@ianguider) September 20, 2018
Updated
Back in the UK, luxury carmaker Aston Martin has unveiled plans to float on the stock market.
The company, famous for its links to the James Bond franchise, reckons it could be worth over £5bn. But will investors agree, given the uncertainty over how Brexit will affect the UK car industry?....
Newsflash: Switzerland’s central bank has warned that trade disputes and the emerging markets crisis are threatening economic growth.
Following its latest monetary policy meeting, the SNB said the economic outlook remains favourable - but protectionism could change that.
It warns:
To date, the crises of confidence in Turkey and Argentina have not materially impacted the global economic outlook.
The risks to this positive baseline scenario are more to the downside. Chief among them are political uncertainties in some countries as well as potential international tensions and protectionist tendencies.
The SNB has left interest rates on hold at their current record low of minus 0.75%.
China denies meddling in US politics
China has also hit back at Donald Trump’s claim that it is trying to undermine US democracy.
Commerce ministry spokesman Gao Feng insists that the new tariffs on $60bn of US goods, which kick in next week, had “nothing to do” with US politics.
Gao was responding to the US president’s claim that China is targeting voters such as farmers, ranchers and factory workers.
These tweets from Tuesday, for example, show that Trump believes Beijing is trying to hurt his supporters, by putting tariffs on US agricultural products and machinery.
China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me. What China does not understand is that these people are great patriots and fully understand that.....
— Donald J. Trump (@realDonaldTrump) September 18, 2018
.....China has been taking advantage of the United States on Trade for many years. They also know that I am the one that knows how to stop it. There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!
— Donald J. Trump (@realDonaldTrump) September 18, 2018
China’s commerce ministry has vowed not to launch a currency war with America.
Speaking to journalists, spokesman Gao Feng says that it will not use the yuan as a tool to resolve its trade dispute, and will maintain it at a reasonable level.
Gao points out that a depreciating yuan is “more detrimental than beneficial” to China’s economy.
Introduction: China says US hasn't been sincere over trade
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Donald Trump’s trade war with China remains the biggest story in the markets today (although Brexit is doing its best to share the spotlight).
After the flurry of tit-for-tat tariffs earlier this week, global investors are watching nervously to see whether the conflict escalates further, or if officials can negotiate a truce.
In the last few minutes, China’s government has launched a stinging attack on Washington, saying America hasn’t been sincere over trade.
Clearly Beijing isn’t happy that Donald Trump signed off 10% tariffs on $200bn of their goods, at the same time as the White House was pushing for new talks.
Reuters has the details:
China’s foreign ministry said on Tuesday that talks on an equal footing are the only correct way to resolve trade issues with the United States, after U.S.President Donald Trump imposed 10% tariffs on about $200bn worth of Chinese imports.
The United States’ current unilateral trade actions cannot be accepted by China, and the United States has not been sincere, ministry spokesman Geng Shuang told a daily news briefing.
The commerce ministry also said it is studying “targeted measures” to help foreign firms in its economy.
That’s a sign that Beijing is taking steps to protect itself from the impact of the trade war.
🇨🇳 🇺🇸 #CHINA IS STUDYING MEASURES TO MITIGATE TARIFF IMPACTS: MOFCOM - BBG
— Christophe Barraud🛢 (@C_Barraud) September 20, 2018
*CHINA SAYS HOPES U.S. TO SHOW GOODWILL TO SOLVE TRADE DISPUTE
Bloomberg is reporting that China is planning to cut the average tariff rates on imports from the majority of its trading partners as soon as next month. That would help Chinese consumers, who face paying more for US imports.
Also coming up today
The Office for National Statistics publishes Britain’s retail sales figures for August this morning. They’re expected to show a 0.2% decline, following a 0.7% jump in July, as household spending power remains squeezed.
David Madden of CMC Markets says:
Traders will be watching this report closely as consumer appetite needs to be healthy to drive the economy along.
There could be turbulence (sorry) at Ryanair’s annual general meeting today. One investors, Royal London Asset Management, has vowed to vote against the airline’s chairman and two other board members.
The agenda
- 8.30am BST: Swiss central bank interest rate decision
- 9am BST: Ryanair AGM in Gormanstown, County Meath
- 9.30am BST: UK retail sales for August
- 3pm BST: Eurozone consumer confidence
Updated
