Summary: Disappointing trade data
As it’s so quiet, here’s a quick recap.
Trade data from Germany and China have raised concerns that the global economy might have slowed somewhat this summer.
Chinese imports and exports both grew slower than expected, at 11% and 7.2% respectively in July. Economists say it could be a sign that domestic demand is dipping.
Germany also missed forecasts, with a 4.5% tumble in imports and a 2,8% drop in exports.
However, this may be a blip after a good run of German data this year.
Mihir Kapadia, CEO of Sun Global Investments, has a good take:
A notable slowdown from China is an indicator that something is amiss. For China, this is particularly concerning as it is engaging on a serious path towards emerging as the next global power house....
[On Germany]....As economists had expected exports to dip by 0.3% and imports to rise by 0.2%, the below par performance will once again ignite criticism that Germany is destabilising the global economy (and contributing to the EU’s woes) by running such a large trade surplus.
The data have investors little to get excited about, with the FTSE 100 now down 9 points and other markets similarly subdued.
But MSCI’s gauge of global markets has hit a new record high, thanks to the long rally in US stocks.
The pound remains vulnerably to Brexit concerns, sliding to a new 10-month low against the euro.
I’ll be back if there are any major developments....
Could a Greek reshuffle be on the cards?
Over in Athens the Greek prime minister Alexis Tsipras is mulling a full-scale government reshuffle over the summer, reports our correspondent Helena Smith
Before departing on what close aides are describing as a “short one-week” holiday this weekend, Tsipras is weighing up pushing ahead with a major cabinet reshuffle in the coming days.
The makeover, well-placed sources say, depends almost entirely on the role the British-trained Greek finance minister Euclid Tsakalotos, will play in the next government.
The Oxford-educated economist is liked by his interlocutors not least officials representing the international bodies keeping debt-stricken Greece afloat but is believed to want to want to move on after overseeing some of the most difficult bailout talks to date.
The reshuffle is aimed squarely at boosting the leftist-led coalition’s flagging popularity ahead of the new economic year which traditionally starts when the prime minister opens the International Trade Fair in Thessaloniki in early September.
Encouragingly for Tsipras, yields (or interest rates) on Greek two and ten-year bonds have dropped precipitously since negotiations were wrapped up. Investors are now looking to the autumn to see what decisions are made regarding mid-term debt relief that would make the country’s economic recovery sustainable.
OECD: Global economic growth looks stable
The global economy is still on a steady growth path, according to the latest heathcheck from the Organisation for Economic Co-operation and Development.
The OECD has rounded up the latest economic data (Composite leading indicators, or CLIs), and concluded that there is “stable growth momentum” across the 35 advanced countries that make up the OECD area as a whole.
However, it has also spotted thatBritain’s economy is slowing (having only grown by 0.5% this year).
The OECD says:
The CLIs continue to point to stable growth momentum in Japan, Canada and the euro area as a whole. Stable growth momentum is now also expected in theUnited States and Italy,while in the United Kingdom the CLI confirms the tentative signs of easing growth flagged in last month’s assessment. Prospects of growth gaining momentum remain unchanged for Germany and France, as well as for China and Brazil.
Amongst other major emerging economies, the CLIs continue to anticipate stable growth momentumin India while in Russia tentative signs of easing growth remain.
Updated
Pound hits new 10-month low against the euro
Sterling has slipped to its lowest level against the euro last October.
The pound dipped by 0.14% to €1.1032 in quiet trading, meaning one euro is now worth 90.63p.
The euro has strengthened steadily in recent months, helped by signs that the eurozone economy is enjoying a good year.
The pound, though, remains dogged by Brexit worries - and fears that Britain and Brussels will fall out over the size of the UK’s ‘exit bill’.
Overnight, Sir Simon Fraser, a former head of the Foreign Office, has claimed that the UK has been “a bit absent” in the early negotiations. London insiders deny that they’re slacking; we’ll find out the truth soon, when the UK releases its position papers on a series of vital issues, including the Irish border and access to the single market.
Here’s a neat chart showing the slowdown in Chinese trade growth last month.
China July Trade in USD:
— Simon Ting (@simonting) August 8, 2017
Imports (red line)+11%, exp 18% last 17.2%
Exports (blue line)+7.2% exp 11% last 11.3% pic.twitter.com/24swpZwPuU
Joshua Mahony of IG adds:
The morning has been all about trade data, with the two powerhouses of Asia and Europe going head to head, to equally disappointing effect.
On the face of it, both German and Chinese trade improved, with their balance of trade improving further. However, this comes as a result of a disproportionately larger fall in imports than the drop in exports.
Certainly a fall in imports and exports across two of the biggest industrial nations in the world is not a particularly bullish sign, yet according to yesterday’s latest World Trade Outlook Indicator, the WTO suggests that global merchandise trade growth will continue to strengthen in the Q3.
Updated
Investors seem to be taking today’s Chinese trade figures in their stride....
Chinese import and export missed forecast.
— Michael (@lampidicsparrow) August 8, 2017
Remember when bad data from china used to move the market pic.twitter.com/jzyhLzt6ee
World markets hit record highs
Newsflash: World stock markets have hit their highest ever levels, following last night’s rally on Wall Street.
The MSCI All-Country World Stocks Index has nudged up to 480.76 points, Reuters reports, helped by Dow Jones’s run of nine record highs in a row (and counting...)
MSCI World at new high. Aug gain would be longest mthly winning streak since '03, 2nd longest in 30-yr history. Yet only 22% above 10yrs ago pic.twitter.com/fxdOnjI5sP
— Mike Dolan (@reutersMikeD) August 8, 2017
Bookmaker Paddy Power is having another rough morning.
Shares have fallen 5% to their lowest level in two years, after the company revealed it might take a year to get its new CEO in place.
Paddy Power announced yesterday that chief executive Breon Corcoran was stepping down, to be replaced by Peter Jackson, CEO of the UK arm of globalpayments business WorldPay Group.
There’s just one problem, Jackson has his hands full handling WorldPay’s takeover by US rival Vantiv, so it’s not clear when he can jump ship.
Corcoran told Reuters that:
“They recognise we both have 12 months notice periods and they’re in the middle of the deal. Peter’s coming here, we all hope it will be sooner but equally it will be within six to 12 months.”
The prospect of a 12-month hiatus hasn’t pleased the City, especially as Corcoran says the company faces a “dynamic and highly competitive market” following its merger with Betfair.
Lee Wild, Interactive Investor’s Head of Equity Strategy, says Jackson has a fight on his hands, especially as the government is reviewing the whole gambling sector.
“Picking Peter Jackson as CEO is a brave move when you’re losing someone of Breon Corcoran’s pedigree.
He’s only held the hot seat at FTSE 100-listed Worldpay’s UK division since March, and Paddy Power Betfair needs strong leadership now more than ever. With wider industry issues at play here, the market is yet to be convinced it’s the right move.
The company has struggled, losing up to a third of its value since the Irish bookmaker merged with the online gambling site 18 months ago.....
Revenue growth of 9% and 21% increase in underlying profit was largely in line with expectations, but there are wider problems for Paddy Power Betfair and the sector.
Translation: It’s quiet out there in the markets....
Good Morning !! Asia mixed, Europe quiet. DXY softish. Crude, Gold both firm. Treasuries flat. S&P futures trading 1 pt below Fair Value.
— Stephen Guilfoyle (@Sarge986) August 8, 2017
European stock markets are subdued this morning, as this morning’s trade figures fail to cheer traders.
In London the FTSE 100 dipped by 3 points or 0.04%.
Yesterday Britain’s blue-chip index hit a seven-week high, but this morning is is being pulled down by mining stocks (following the Chinese import and export slowdown).
German trade surplus rises as imports slide
It’s a double-dose of disappointing trade data.
Germany has reported that exports shrank by 2.8% during June. That’s the biggest monthly drop since August 2015, and ends a five-month run of growth.
In another blow, German imports shrank by 4.5% during the month - the biggest drop since January 2009 when the world economy was sliding into recession.
Economists had expected exports to dip by 0.3%, and imports to rise by 0.2%.
German July Imports comes in at -4.5% m/m (f'cast 0.2%) vs 1.3% in June
— Mauro Ippolito 📈 (@MauroIppolito) August 8, 2017
This has driven Germany’s trade surplus up to €21.1bn, from €20.3b in May, a 10-month high.
That may intensify criticism that Germany is destabilising the global economy by running such a large trade surplus.
German trade numbers disappoint as export dropped by 2.8% vs +0.2% expected. Current account balance €22.3bn in June vs €23bn cons forecast. pic.twitter.com/IAtAB5DL7R
— Holger Zschaepitz (@Schuldensuehner) August 8, 2017
German trade data weaker than expected, like China
— Mike van Dulken (@Accendo_Mike) August 8, 2017
Chinese trade: What the experts say
The slowdown in Chinese trade growth last month has not pleased the City.
Capital Economics fear that China’s economy could be cooling:
“Despite an uptick at the end of the second quarter, trade growth now appears to be on a downward trend. In particular, the sharp decline in import growth since the start of the year suggests that domestic demand is softening,”
Michael Hewson of CMC Markets says the figures may show the global economy losing some momentum:
This morning’s Chinese trade data for July has got Q3 off to a slow start with imports only rising 11% a sharp fall from June’s 17.2%, which raises some concerns that domestic demand may be softening.
Exports were also a bit of a worry as they only rose 7.2%, below expectations of 11% and a fall from June’s 11.3%. This would appear to suggest that while global demand is still positive it may well not be as strong as initially thought, which might be a concern further down the line if it suggests a start of a trend.
David Scutt of Business Insider points out that imports of key commodities slowed in July:
Crude oil imports stood at 34.66 million tonnes, down from 36.11 million tonnes a month earlier, while imports of iron ore slipped to 85.74 million tonnes from 94.7 million tonnes in June.
Coal imports also dipped to 19.46 million tonnes, a four-month low.
Chinese trade data misses as export and import growth slows (via @BIAUS) https://t.co/dIU5xSHPJZ pic.twitter.com/GnehDtymJZ
— BI AUS Markets (@BIAUSMarkets) August 8, 2017
Naeem Aslam of Think Markets says investors won’t be happy to see Chinese export growth slowing:
The numbers have painted a dull picture to start the third quarter of this year. It is important that global demand improves because that would imply that the world economy is healthy.
Updated
The agenda: Chinese trade misses forecasts
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The global economy is in the spotlight today, as investors digest new trade figures from China and Germany.
And China has disappointed the markets, by reporting that imports and exports both missed expectations in July.
Chinese exports only grew by 7.2% per year last month (in US dollar terms), down from 11.5% in June, and below expectations of an 10.9% rise.
That’s the weakest growth since February, when Chinese industry was disrupted by the Lunar New Year festivities.
Imports have also underwhelmed, rising by 11%. That sounds like a good performance, until you note that it’s down from 17.2% in June, and the weakest growth since December. Economists had expected growth of around 16.6%.
This drove the Chinese trade surplus up to $46.74bn, the highest since January.
Want to trade the Aussie? - here's what's going on behind those Chinese trade figures https://t.co/Ae5ei59OKG #ForexNews pic.twitter.com/qXwvqfzC5N
— 18d.Media (@18dMedia) August 8, 2017
This may show that global demand is cooling; just at the moment when central bankers in several advanced economies are pondering whether to tighten monetary policy and unwind their stimulus packages.
The figures are just as discouraging if you price them in yuan, rather than US dollars, as economist Daniel Lacalle tweets:
China 🇨🇳 trade data shows evident slowdown
— Daniel Lacalle (@dlacalle_IA) August 8, 2017
Imports up 14.7% y-o-y, vs previous 23.1%
Exports up 11.2% y-o-y, vs previous 17.3%
Otherwise, the day looks a little quiet with not much in the diary. There could be excitement on Wall Street, though, where the Dow has hit nine record highs in a row. Can it manage a 10th?
Dow has rallied for 10 days in a row (605 points). Sequence of gains has extended to 11 days only once since Fri 3 Jan 1992 @MarketsContext
— Anthony Cheung (@AWMCheung) August 8, 2017
There’s not much hope of drama in Europe’s markets, though; the main indices are all expected to dip a little. I guess the August lull may have arrived.....
Our European opening calls:$FTSE 7518 -0.18%
— IGSquawk (@IGSquawk) August 8, 2017
$DAX 12237 -0.17%
$CAC 5201 -0.14%$IBEX 10684 +0.07%$MIB 21998 -0.15%
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