US inflation rises less than expected
US inflation rose to 1.7% in July from 1.6% in June. Economists had forecast a bigger rise, to 1.8%.
US inflation edging up, but still below 2% target. Weaker dollar, rising commodity prices and healthy growth point to rising price pressures
— ING Economics (@ING_Economics) August 11, 2017
On that note, we’re closing up for the day. Thank you for all your comments and please join us again on Monday. AM
Tata Steel signs new pension deal for workers
Tata Steel has agreed a new pension scheme for tens of thousands of workers, ending doubts about future payments.
The trade unions Community, Unite and GMB said in a statement:
We welcome the announcement which includes a commitment that Tata will stand behind a new scheme with reduced annual increases.
For over a year our members have feared for their security in retirement, and this announcement helps to bring that uncertainty to an end.
Wilko warns 4,000 UK jobs at risk
Wilko, the high street homewares and household goods chains, has warned almost 4,000 workers they could lose their jobs.
The retailer, which reported an 80% drop in full-year profits last month, said it has placed 3,900 staff working as stock supervisors, till supervisors and assistant managers, into consultation, which could lead to redundancy.
The company also said organisational changes could lead to the creation of about 1,000 new senior supervisor roles.
Read our full story here:
History tells us that we are probably not seeing the start of a sustained fall in US equities according to economists at Capital Economics:
The recent escalation of tensions between the US and North Korea has weighed on the S&P 500. But provided that war is avoided, we doubt that this marks the start of a sustained downturn in the index.
This was the case for US equities during the 1962 Cuban missile crisis, when the world arguably came closest to conflict between two nuclear-armed powers. Although the S&P 500 fell after US President Kennedy announced the discovery of missiles on Cuba, it had recovered its losses before Soviet General Secretary Khrushchev announced six days later that the missiles would be removed.
There have been other instances since WW2 when the US has potentially been on the brink of a war that did not break out. Admittedly, these did not pose such a direct threat to the US. But they also typically had little lasting effect on the S&P 500.
Our assumption is that there will not be a war between the US and North Korea. We are therefore sticking to our forecast for the S&P 500 to end this year and next only a touch below its current level.
Trump latest: US military is 'locked and loaded'
President Trump has taken to Twitter with a fresh warning for North Korea:
Military solutions are now fully in place,locked and loaded,should North Korea act unwisely. Hopefully Kim Jong Un will find another path!
— Donald J. Trump (@realDonaldTrump) August 11, 2017
The lack of conciliatory tone is unlikely to sooth markets.
FTSE extends losses
The FTSE 100 is now down 90 points as investors find little to cheer about.
The latest scores across Europe:
- FTSE 100: -1.2% at 7,299
- Germany’s DAX: -0.3% at 11,978
- France’s CAC: -1.2% at 5,057
- Italy’s FTSE MIB: -1.4% at 21,387
- Spain’s IBEX: -1.4% at 10,309
- Europe’s STOXX 600: -1.1% at 372
Cracks appear in Greek coalition
Over in Greece there are growing signs that collaboration between the ruling left-wing Syriza party and its junior coalition partner, the small rightwing Independent Greeks, may finally be coming to an end. Helena Smith reports:
From the outset, the progressive leftist Syriza party and the arch-nationalist, ultra right wing Independent Greeks, Anel, made for odd bedfellows. Austerity, or rather the two parties’ dislike for it, was their common point of reference. With the worst of bailout negotiations finally over and unpopular pension cuts and tax hikes legislated, rumours of a rift have been growing.
Today, Panos Kammenos, leader of Independent Greeks, took to the airwaves to try and dispel the speculation:
We are participating in the government but have made clear our red lines with regards to issues of religion, the homeland and national matters … we often disagree in parliament. This doesn’t mean that each person cannot express their personal opinion.
But veteran leftists in Syriza are grumbling, arguing that with Anel as its partner the coalition will never be able to move ahead with the leftist policies it wants to implement now that the worst of fiscal adjustment is over.
Hong Kong growth beats forecasts
Hong Kong’s economy grew faster than expected in the second quarter, boosted by exports, household spending and investment.
GDP increased by 1% between April and June, compared with the same period a year earlier, up from 0.7% in the first quarter. Economists had forecast a slight slowdown to 0.6%.
Hong Kong’s statistics office raised its forecast for full-year growth in 2017 to a range of 3-4% from 2-3% previously.
However, Chang Liu, China economist at Capital Economics, said growth in Hong Kong is likely to slow:
We think GDP growth will slow in the second half of the year. The recent strength in capital spending won’t last. The city’s overheated property market also remains a major concern.
For this year as a whole, we remain comfortable with our forecast that GDP will grow by around 3.3%, which is well above most expectations. But we expect growth to slow to 1.5% in 2018, which is lower than most expect.
July inflation rates for the eurozone’s largest economies have been confirmed:
- Germany: 1.7%
- France: 0.8%
- Italy: 1.2%
- Spain: 1.5%
Volatility index highest since Trump election
The VIX index, which measures market expectations of short-term volatility, has hit 17.19.
That’s the highest level since Donald Trump’s election victory in November.
Neil Wilson, senior market analyst at ETX Capital, has this take:
Volatility is back: the VIX just popped to its highest since the election of Donald Trump as jitters about North Korea roil risk sentiment. It’s about time the market woke up – nothing like the prospect of a nuclear stand-off to sharpen mind of investors who had become a tad complacent.
It comes amid another bloodbath for European stocks. The FTSE and CAC in particular are taking a pasting, while the DAX is trading below its 200-day moving average. The FTSE is now about 250 points, or more than 3%, below its high of the week hit on Tuesday.
Oil prices fall on over supply concerns
Brent crude oil is down 1.2% at $51.30 a barrel, as fears about over supply persist.
CMC’s Michael McCarthy says the tensions between the US and North Korea are also weighing on oil.
I think the issue that is affecting the market is the general risk sentiment of sabre-rattling between Washington and Pyongyang.
The drop in oil prices is despite official data, which showed inventories in the US fell by 6.5 million barrels in the week ending 4 August.
Pound hovers at three-week lows
The pound is roughly flat against the dollar this morning, at $1.2973.
That is a touch above the three-week low of $1.2952 on Thursday, as investors digested a mixed bag of data on the UK economy.
Viraj Patel, currency strategist at ING, said a weaker trend for the pound was likely:
The July bounce in sterling was on some expectations that the Bank of England will increase interest rates at its latest policy meeting, but with fundamentals looking increasingly downbeat for the economy, it seems to to be a path of gradual weakness for sterling.
The pound is up 0.1% against the euro at €1.1032.
European markets are down across the board this morning:
- FTSE 100: -0.9% at 7,322
- Germany’s DAX: -0.2% at 11,989
- France’s CAC: -0.7% at 5,079
- Italy’s FTSE MIB: -0.9% at 21,493
- Spain’s IBEX: -0.8% at 10,368
- Europe’s STOXX 600: -0.6% at 374
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Gold boosted as investor seek safe haven
Gold prices are holding steady after hitting the highest in more than two months earlier this morning.
Investors are piling out of equities and into gold, as escalating tensions between the US and North Korea drive demand for safe haven assets.
Spot gold hit the highest since 8 June at $1.284.64 per ounce, and is on course for a weekly gain of more than 2%.
Jeffrey Halley, senior market analyst at Oanda:
Traders should closely watch global equities today, with further falls and risk aversion likely pumping more safe-haven flows into precious metals.
FTSE 100 opens lower
The FTSE 100 is down 60 points or 0.8% in early trading at 7,330, as investors jitters in the US and Asia spread to Europe.
David Madden, analyst at CMC Markets, says the tensions between the US and North Korea are completely dominating markets around the world.
Stock markets in Asia overnight continued to be under pressure from the stalemate between North Korea and America.
The tension between the US and North Korea is still dominating the news and it is looming over the financial markets.
The uncertainty surrounding the situation has been the main driver of the markets recently, and the enormous surge in the volatility index tells us exactly what traders are thinking.
Global equity markets have been severely shaken by the standoff between the two countries,
The agenda: Investors spooked as Trump ramps up North Korea threats
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Asian markets have followed Wall Street lower this morning as Donald Trump ramped up threats against North Korea.
The President suggested his previous threat to unleash “fire and fury” on the country was not “tough enough”.
He told reporters:
[North Korea] better get their act together or they’re going to be in trouble like few nations ever have been in trouble in this world.
Here is our full story on the developments:
In Asia, the Hang Seng is down 1.8% at 29,956, while the Shanghai Composite index fell 1.7% to 3,207.
European markets are expected to open lower:
Our European opening calls:$FTSE 7348 -0.57%
— IGSquawk (@IGSquawk) August 11, 2017
$DAX 11925 -0.75%
$CAC 5075 -0.78%$IBEX 10352 -0.94%$MIB 21516 -0.76%
Also coming up today are July inflation figures from the major eurozone economies and the US.
