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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Eurozone shakes off Brexit fears, but Chinese trade figures disappoint – as it happened

Cargo containers waiting to be transported at a port in Qingdao, eastern China’s Shandong province.
Cargo containers waiting to be transported at a port in Qingdao, eastern China’s Shandong province. Photograph: STR/AFP/Getty Images

Afternoon summary

The summer lull is in full swing, so let’s quickly recap.

China has reignited concerns over global economic growth, after posting disappointing trade figures.

The 4.4% drop in exports suggests world demand is weakening, while the 12.5% tumble in imports is a reminder that China’s economy is slowing.

Economists expect Beijing to weaken the yuan, in an attempt to stimulate its economy.

Eurozone investors have shrugged off the shock of Britain’s Brexit vote, according to the latest morale survey from Sentix.

And Brits also defied slowdown concerns in July, spending more in the shops:

Britain’s bosses are back in the fat-cat house, after research showed their salaries jumped by 10% last year.

Some employees seem more concerned that they may pay their poorest employees too much; they’re lobbying against planned increases in the National Living Wage.

The government, though, says it’s committed to boosting the take-home pay of those at the bottom.

On a lighter note, we also enjoyed seeing Bank of England governor Mark Carney glittered up at a swanky festival, and learning that Financial Times editor Lionel Barber is being honoured by Paris (but apparently it’s a secret.... )

And with little corporate news around, the FTSE 100 index hit a new 14-month high this morning. But it’s now up just 1 point, a clear sign that we should shut up shop :)

See you in the morning.... GW

Britain will be the worst-performing advanced economy this quarter, as the Brexit vote hits the country’s economic output.

That’s according to JP Morgan, which predicts UK GDP will fall by 0.5% in July-September, before recovering the lost ground in the final three months of 2016

Warm congratulations to the Financial Times’s editor, Lionel Barber, who has been granted France’s highest honour, to become Chevalier in the Ordre National de la Légion d’Honneur.

Barber has been recognised for his “remarkable career”, his “contribution to high-quality journalism, and the Financial Times’ positive role in the European debate”.

Worthy recognition for a long run at the top of British media, at a time of unprecedented change.

However, he’s not going to pick up any prizes for social network skills. Barber accidentally leaked the news himself today, in a direct message that went to all his 37,000 followers.

He quickly deleted it. But not quickly enough....

Lionel Barber's tweet
Oops Photograph: Twitter
x

Wal-Mart, the US shopping mega-giant, has just snapped up e-commerce site Jet.com for $3bn.

It’s another gobbet of news to brighten up a quiet day, but a pretty small deal by Wal-Mart’s standards:

Good news for low-paid workers. The British government hasn’t abandoned its plan to raise the minimum wage over the next few years, despite this pressure from business groups.

A spokesperson for the Department for Business, Energy and Industrial Strategy said:

“The Government is committed to building an economy that works for all and ensuring that the National Living Wage works for employees as well as businesses of all sizes, and will continue to back small firms to grow and create jobs by providing an environment in which they can thrive.

“The Low Pay Commission plays a critical role in providing recommendations for National Minimum Wage rates, and now has additional responsibilities to help deliver the National Living Wage. The Government has asked the Low Pay Commission to recommend increases to the National Living Wage towards 60% of median earnings by 2020, subject to sustained economic growth.”

Another reminder of how China’s economy has looked sluggish for some time...

Up in Scotland, oil exploration firm Transocean has confirmed that one of its rigs has been blown back onto the coast while being towed.

It says that:

During severe weather, the Transocean Winner lost its tow, and subsequently grounded off the Western Isles of Scotland.

Fortunately, no personnel are at risk, the company says.

And here it is, off the Isle of Lewis:

The Transocean Winner oil rig, which is at risk of grounding off the Isle of Lewis after high winds hampered a towing operation.

Readers may remember that Transocean owned the Deepwater Horizon exploration rig, which caught fire and sunk in 2011 with the loss of 11 lives, causing the Gulf of Mexico oil spill disaster.

Updated

Eurozone shakes off its Brexit fears

In “news I missed earlier”, eurozone investors appear to have shaken off their initial panic over Britain’s vote to leave the EU.

The Frankfurt-based Sentix research group’s monthly index of investor morale has risen to 4.2, from 1.7 in July.

Sentix says:

“The Brexit shock only lasted a short while. Worries about an economic slowdown have not grown further.”

That may be because the Bank of England moved swiftly to respond to the vote, offering hundreds of billions of pounds of liquidity to banks.

Eurozone investors may also have noticed that Britain hasn’t actually done very much about leaving the EU yet.

Back to China’s trade data....and economist Des Supple also predicts Beijing will devalue the Chinese yuan against the US dollar, to help its exporters.

He fears that the global economy simply isn’t growing fast enough to keep Chinese factories busy:

Updated

Two 150g large bags of Tyrrells flavoured hand cooked potato chips

Some breaking news for crisp fans -- Tyrrells, supplier of flavoured fried potato slices to the masses, has been sold to US popcorn maker Amplify Snack Brands in a £300m deal.

Tyrrells was created by farmer William Chase, who found it was rather more profitable to turn his potatoes into crisps than sell ‘em by the kilo.

Chase cashed out back in 2008, when he sold the business to a private equity firm. He’s still got his hands full of potatoes, though, turning them into expensive spirits.

Mrs W assures me that the £38-a-bottle Chase Gin is worth every penny.....

Updated

Here’s a chart of China’s choppy trade stats, showing how exports and imports have been weak (in dollar terms) recently:

Chinese trade data
Chinese trade data

It’s been a tough few months for the world’s central bankers, so we’re delighted to see that Bank of England governor Mark Carney had a relaxing weekend at the Wilderness Festival in Oxfordshire:

We don’t know if any irate Cotswold savers tackled Carney over last week’s interest rate cut - but anyone lashing out £177 for a ticket to the four-day jamboree will hopefully ride out the slowdown.

Updated

Conor D’Arcy, Policy Analyst at the Resolution Foundation, is also alarmed that UK companies are trying to squeeze pay rates at the bottom, while letting CEO pay surge by another 10%:

“On a day when new figures show that Chief Execs are now paid 140 times as much as the average worker, it’s not the best time for some businesses to focus on slowing the pay growth of those at the very bottom.

“By sensibly pegging the National Living Wage to typical earnings, the government has already built in flexibility to help steer it through choppy economic times. Most employers acknowledge and support this approach, and the government should continue with a policy that will deliver a much-needed pay rise to up to six million workers.

Updated

Businesses push back against national living wage

With deliciously poor timing, a group of trade bodies are lobbying the government to change its plans to raise the UK minimum wage.

They are arguing that the uncertainty created by the Brexit vote means companies may not be able to pay staff at least 60 per cent of median earnings by 2020 (which would raise wages to around £9.02 per hour from £7.20 today).

The Financial Times’s Sarah O’Conner has the story:

Businesses are trying to persuade the government to slow or even abandon its policy to raise the “national living wage” to one of the highest rates in the developed world by 2020.

At least 16 trade associations have written jointly to Greg Clark, the new business secretary, recommending that he “exercise caution” on the national living wage in light of the “economic uncertainties the country faces” after the Brexit vote.

Ideally, they would like the government to drop the 2020 target and restore the original powers of the Low Pay Commission, the committee of experts tasked with recommending minimum wage rates each year.

More here: Business pushes back on national living wage

There is a serious point here - there must be an ‘optimum’ level for the minimum wage that delivers the maximum benefit to workers without harming recruitment.

However, businesses would be on firmer footing if they hadn’t just handed their bosses a 10% pay rise.

Buzzfeed’s Simon Neville nails it:

Updated

Ana Thaker, market economist at PhillipCapital UK, reckons Beijing will be spurred into action by July’s weak trade data.

The figures highlighted the weakness we have seen in the global economy and as exports slow, we could see the government and central bank engage in more easing policies to weaken the Yuan and stimulate domestic consumption and output.

A weak Yuan would also have the added benefit of stifling imports and leading Chinese consumers to buy more domestically produced goods - leading to the consumption driven economy the country has been aiming for over recent years.

After a lacklustre spring, Germany’s factory sector bounced back in June with a 0.8% increase in production.

If you strip out energy and construction, the figures are even better - with a 1.5% jump in output.

An Airbus A380 on display at the Farnborough International Airshow in Hampshire.

France’s Airbus group is missing out on today’s rally.

Shares in the aerospace company have dropped by 1.3% after it revealed Britain’s Serious Fraud Office is conducting a criminal investigation into allegations of fraud, bribery and corruption in the commercial airline business.

Europe’s main stock markets are all rising in early trading:

European stock markets
European stock markets Photograph: Thomson Reuters

FTSE 100 hits new 14-month high

City of London.

The weak Chinese trade data hasn’t spooked the City, though.

The FTSE 100 index has gained 29 points to 6823, its highest level since Jun 2015†.

Mining stocks are among the risers, with Anglo American and BHP Billiton both up around 3.5%.

Traders may be expecting Beijing to launch further stimulus efforts to keep its economy on course, which would boost demand for their natural resources.

China’s appetite for overseas oil may also be waning.

Imports of crude oil in July dropped to their lowest level since January, new figures show, signalling that energy demand has dipped:

Chinese trade: What the experts say:

Trucks transport containers at a port in Qingdao, eastern China’s Shandong province.
Trucks transport containers at a port in Qingdao, eastern China’s Shandong province. Photograph: STR/AFP/Getty Images

Economist are disappointed by the fall in Chinese imports and exports in July.

Capital Economics’ China economist Julian Evans-Pritchard fears further trouble ahead (Reuters reports).

“Signs of stronger manufacturing activity among many of China’s key trading partners has so far failed to lift export growth.

“The country’s export growth is likely to remain subdued for some time.”

IG analyst Angus Nicholson believes China’s trading partners will be concerned that its trade surplus swelled to $52.3bn last month (via the WSJ)

“I definitely think we could see concern over the surplus...We have a long way to go before we really see a decline in China’s overcapacity.”

Clara Leonard of RBC Capital Markets says the trade figures are a bad start to a busy week of Chinese data:

In China this morning, July trade data was a disappointment, highlighting that world trade growth remain weak....

In China, there will be several other important economic releases this week, including July inflation (Tuesday), industrial production (Friday), retail sales (Friday) and finally new loans and M2.

Chinese exports slide

The week is beginning with worrying news from China.

Chinese exports shrank by 4.4% year-on-year in July in dollar terms, following a 4.8% decline in June, according to fresh figures from the country’s customs department.

It may indicate that Britain’s Brexit vote has hit global confidence, or that the world economy is weakening for other reasons.

Chinese imports were even worse, shrinking by 12.5% year-on-year, the biggest decline since February. That suggests China’s domestic demand is faltering despite Beijing’s efforts to stimulate its economy.

The figures are slightly better in local currency terms, due to the recent depreciation of the yuan.

But it’s not what the markets were looking for, and renews concerns over China’s ability to rebalance its economy and tackle the bad debts lurking in the banking sector.

Naeem Aslam, chief market analyst at Think Markets UK, says the trade figures could spark more concern about China:

Investors have not paid much consideration to Chinese numbers for some time now, as their attention was very much focused on Brexit and the Fed interest rate. However, the number released over in China has made investors wary once again that the situation both at home and abroad is not improving.

I’ll pull together more reaction shortly....

Updated

The agenda: UK bosses pay soars again

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britons are waking up to the news that the bosses of their largest companies have enjoyed another bumper pay rise.

The average CEO (and some of them are more average than others) took home £5.5m last year in pay and other incentives, according to the High Pay Centre. That’s 10% more than a year ago.

Advertising magnate Sir Martin Sorrell needed a particularly large wheelbarrow, as he picked up £70m thanks to a long-term incentive plan.

The report piles more pressure on the City to reform its pay policies, after a summer of shareholder anger against boss pay.

My colleague Juliette Garside explains:

“There is apparently no end yet in sight for the rise and rise of chief executive pay packages,” said the centre’s director, Stefan Stern. “In spite of the occasional flurry from more active shareholders, boards continue to award ever larger amounts of pay to their most senior executives.”

Leading company bosses now typically earn 129 times more – including pensions and bonuses – than their employees.

The prime minister has promised to rein in soaraway salaries. In a shot across the City’s bows, Theresa May last month set out a series of boardroom reforms, including giving employee representatives a seat at the top table. She condemned the “irrational, unhealthy and growing gap between what these companies pay their workers and what they pay their bosses”.

The report should get plenty of attention today, especially as we’re into the August lull.

There’s really not much on the agenda today, apart from

  • Chinese trade data (more on that shortly)
  • German industrial production figures for June
  • Eurozone Sentix confidence survey, at 9.30am BST

And the European stock markets are likely to be subdued:

Updated

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