And finally...Larry Kudlow, adviser to Donald Trump and national economic council director has been speaking to Bloomberg TV about China.
As uncertainty swirls around global markets, Kudlow said there was no timetable in place or planned negotiations following President Trump’s declaration that he was considering new $100bn tariffs on China.
"China is the problem; President Trump is the solution": Larry Kudlow
— Javier Blas (@JavierBlas2) April 6, 2018
Now live on @BloombergTV with @FerroTV #TradeWars #China #soybeans #oil pic.twitter.com/CXHeeedW4x
On that note, we’ll close up for the day. Thank you for reading the blog and please join us again on Monday.
Have a good weekend.
European markets are still largely in the red but the extent of losses has eased. The FTSE is roughly flat.
- FTSE 100: -0.1% at 7,196
- Germany’s Dax: -0.6% at 12,234
- France’s CAC: -0.2% at 5,265
- Italy’s FTSE MIB: -0.2% 22,929
- Spain’s IBEX: -0.3% at 9,716
- Europe’s STOXX 600: -0.3% at 375
Wall Street opens lower
The opening bell has rung and US markets are down as fears of a trade war with China escalate and jobs disappointed.
- Dow Jones: -1% at 24,270
- S&P 500: -0.9% at 2,640
- Nasdaq: -1.1% at 7,000
Craig Erlam, senior market analyst at currency firm Oanda says that the dollar has been little moved by the big miss on US jobs because traders have other things on their minds:
It’s not often that the see a miss of around 88,000 in the US job creation figures and markets shrug it off but that’s exactly what we’ve seen today.
The US jobs report was somewhat overshadowed this week by the ongoing back and forth between the world’s two largest economies which has threatened to disrupt the period of strong growth the global economy is seeing.
Despite that, traders as ever were paying very close attention to the data release and were clearly unmoved by what they saw, despite the non-farm payrolls number being well below expectations.
The 103,000 increase in US jobs in March was well below the 202,000 average of the past three months.
But Paul Ashworth, chief US economist at Capital Economics, says the non-farm payrolls report is typically volatile:
The modest 103,000 gain in payroll employment in March, which follows a massive 326,000 gain in February, is a good illustration of the inherent volatility in the non-farm payroll data. The March gain was the worst in six months. The February gain was the best in two-and-a-half years.
With payrolls up just 103K in March the deceleration of job growth under #Trump continues:
— Adam Quinton (@adamquinton) April 6, 2018
Latest 12-mo av 188K
vs monthly avs of
2016: 195K
2015: 226K
2014: 250K
c @RepDMB @shellyporges@EdGrapeNutZimm @JohnJHarwood @JRubinBlogger
Economists at ING say the US Federal Reserve is likely to shrug off the weak jobs growth in March, instead focusing on the pick-up in wage growth to 2.7% (as expected) from 2.6%.
The bank’s James Smith says we’re still on track for three more interest rate rises this year:
A rebound in wage growth will outweigh any concerns over lower payrolls for the Fed, as policymakers gear up for three more hikes this year.
With core inflation set to reach the 2% level again in data released next week, we expect the Fed to raise rates a further three times this year – although of course, policymakers will also have a firm eye on escalating global trade tensions.
US payrolls disappoint but wage growth picks up
The headline figure on March payrolls was a very big miss but there was better news on wage growth, which picked up to 2.7% year-on-year last month from 2.6% in February.
But a predicted fall in the jobless rate to 4% did not materialise, instead remaining unchanged at 4.1% according to the US Labor Department.
The department said the 103,000 increase in payrolls in March was driven by the manufacturing, health care and mining sectors, as well as professional and business services.
Employment in the retail and construction sectors fell last month after large gains in February.
US non-farm payrolls weaker than expected
The closely watched report is just out and shows the US economy added 103,000 jobs in March.
It was the lowest in six months and sharply below economists’ forecasts of 193,000.
The figure for February was revised up to 326,000 from 313,000.
It’s almost time...
C'MON PAYROLLS FOR CRYING OUT LOUD
— WorldFirst (@World_First) April 6, 2018
President Trump is standing by his trade policy today:
Despite the Aluminum Tariffs, Aluminum prices are DOWN 4%. People are surprised, I’m not! Lots of money coming into U.S. coffers and Jobs, Jobs, Jobs!
— Donald J. Trump (@realDonaldTrump) April 6, 2018
He has also retweeted his tweet from Wednesday when he claimed America was not in a trade war with China:
We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!
— Donald J. Trump (@realDonaldTrump) April 4, 2018
Updated
The government’s sugar tax comes into force today, in an attempt to lower sugar consumption and reduce obesity rates in the UK.
Officially called the soft drinks levy, prices of some drinks will rise as manufactures pass on some of their additional costs.
The Institute for Fiscal Studies says the policy is well-targeted to reduce sugar consumption among the young:
The #sugartax which comes into force today is well-targeted at sugar consumption among young people - those aged between 11 and 20 get more than 1/4 of sugar from soft drinks pic.twitter.com/DNZ70sdimQ
— IFS (@TheIFS) April 6, 2018
Trade war or rebalancing?
I think there is a clear distinction to be made between an attritional trade war versus a short, sharp blitz that produces a reset in relations. At present I think we have the latter. Let's face it, China hasn't been playing fair for years https://t.co/4q0IVAG9KF
— Neil Wilson (@marketsneil) April 6, 2018
Updated
Here is our full story on this morning’s UK productivity figures, which showed a pick-up for a second consecutive quarter at the end of 2017:
US non-farm payrolls growth expected to slow
It’s non-farm payrolls day, and we’ll get the latest snapshot of the US jobs market when the Labor Department publishes the March figures at 1.30pm UK time.
Here is what is expected from economists polled by Reuters. (Figures in brackets show February’s figures, which could be revised.)
- US non-farm payrolls: +193,000 (+313,000)
- Unemployment rate: 4% (4.1%)
- Average earnings growth, year-on year: 2.7% (2.6%)
US stock index futures are down as a gloomy mood persists among investors on both sides of the Atlantic:
- Dow futures: -0.8%
- Nasdaq futures: -0.8%
- S&P futures: -0.7%
The Institute of Directors says its too early to get excited about the long-awaited pick-up in UK productivity.
Senior economist Tej Parikh says:
While productivity growth has been near its strongest since the recession in recent quarters, it’s still too early to begin heralding this as the start of a new trend.
For starters, a drop-off in hours worked played a key role in pushing up the numbers, while all-important output growth has continued to be modest. So, policymakers need to keep their foot on the gas. Business leaders would encourage the government to push forward with consultations and with allocating funding from the Industrial Strategy, to help kick-start the economic engine.
Solving the productivity puzzle will require a comprehensive approach. Directors want to see improvements in the nation’s physical and digital infrastructure, to help boost idea diffusion and connectivity between regions.
But macro investments need to be matched by direct support for businesses, particularly the ‘long tail’ of low productivity SMEs. These firms need greater assistance to absorb new technologies and to upskill their workers and management in order to deliver efficiency enhancing changes to their organisations.”
Robert Jenrick, exchequer secretary to the Treasury, has responded to the productivity figures with the usual stuff:
We want to increase productivity growth to ensure higher living standards for people across the country.
It’s encouraging we’ve had the best two quarters of productivity growth since the financial crisis but we must improve productivity over the longer term, which is why we are increasing public investment in our schools, hospitals, and infrastructure in this parliament to the highest sustained level in 40 years.
UK productivity rises for a second quarter
Productivity in the UK grew by 0.7% in the fourth quarter of 2017, according to figures published this morning by the Office for National Statistics.
It was the second consecutive quarter of productivity growth - as measured by output per hour - and left productivity 1.8% above its peak in the fourth quarter of 2007, before the financial crisis took hold.
Some decent news after a prolonged period of weak productivity since the beginning of the crisis which has left the UK lagging behind other economies and created a “productivity puzzle” for economists, who would have expected to see a pick-up after the downturn.
As the ONS explains:
An increase of 0.7% is slightly higher than the average quarterly rate of productivity growth in the decade prior to the 2008 economic downturn, since when UK productivity growth has been subdued.
This sustained stagnation, often referred to as the “productivity puzzle”, contrasts with patterns following previous UK economic downturns when productivity initially fell, but subsequently recovered to the previous trend rate of growth.
The graph below shows how UK productivity failed to pick-up again as expected after the financial crisis:
Marks and Spencer and Next lead FTSE lower
Marks and Spencer is the biggest faller on the FTSE 100 this morning, closely followed by Next.
- Marks and Spencer: -3.3% at 264.9p
- Next: -2.8% at £46.83
Two of the biggest names on Britain’s high streets have been hit by a negative note from investment bank Citigroup, which has downgraded both retail stocks.
The downgrade came with the following assessment from the bank’s retail analysts:
Investors should buy online over offline, Europe over UK, and brands over retailers.
Losses have accelerated on markets across Europe this morning, with all major indices in the red as trade war fears continue to weigh on investor sentiment:
Updated
Neil Wilson, analyst at ETX Capital, says investors shouldn’t be too concerned about Trump’s threat because the additional tariffs might never be imposed.
A fresh salvo from Trump on tariffs is weighing on markets today, but for all the posturing we are a long way from an all-out trade war. European indices have opened in the red and US futures point to some losses again.
But we are a long way from this becoming policy by either the US or China. These remain merely proposals with a lot of ways and time for the administration to back out.
It all looks more like a classic Trump negotiation - float an extreme position to step back from the worst-case scenario in return for some big concessions. Both sides would prefer to negotiate a settlement.
Nevertheless, markets will be sensitive to the fact that a full-blown trade war could result if the two camps back themselves into a corner. The risk of miscalculation increases the more the two sides push this.
US-China trade spat 'could wipe 0.5% off Chinese GDP'
The US-China trade spat could wipe 0.5% off Chinese gross domestic product - if the US carries out its latest threats and Beijing responds.
That is an estimate from economists at Capital Economics, who were predicting the row would cost China 0.1% in GDP before the latest escalation.
They suggest that if the US does impose new tariffs on $100bn of Chinese imports, President Xi Jinping may feel he has no choice but to once again respond in kind.
Julian Evans-Pritchard, senior China economist at the consultancy, explains the risks:
This would mean expanding the proposed Chinese tariff list to cover nearly all imports from the US, which Chinese data put at $155bn last year.
These higher stakes increase the urgency of reaching an agreement with the US but also risk a more damaging outcome if talks break down.
Beijing: we are not afraid of a trade war
Fighting talk from Beijing this morning as it responds to Trump’s revelation that he is considering new $100bn tariffs on goods imported from China.
China’s Ministry of Commerce said in a statement:
If the US side disregards opposition from China and the international community and insists on carrying out unilateralism and trade protectionism, the Chinese side will take them on until the end at any cost.
We don’t want a trade war, but we aren’t afraid of fighting one.
Trump responds to China's trade tariff retaliation
In the very definition of a tit-for-tat row, Donald Trump announced on Thursday night that he had instructed the US trade representative to consider slapping $100bn in additional tariffs on Chinese goods.
He said in a statement the further measures were being considered “in light of China’s unfair retaliation” against earlier US trade actions.
It came a day after China issued a $50bn list of US goods including soybeans and small aircraft for possible import tariff hikes. That itself was 11 hours after the White House announced a list of 1,333 Chinese imports, also worth about $50bn, for punitive tariffs of 25%.
Wall Street tipped to open lower
Traders at spread-betting firm IG are expecting US markets to open lower. (The Wall Street opening bell goes at 2.30pm BST.)
Early Morning US Opening Calls:#DOW 24286 -0.90%#SPX 2642 -0.78%#NASDAQ 6532 -0.96%#IGOpeningCall
— IGSquawk (@IGSquawk) April 6, 2018
European markets open lower on trade war fears
The FTSE 100 has opened lower this morning, along with the rest of its major European peers, as investors fear a full-blown trade war between the world’s two largest economies.
- FTSE 100: -0.3%
- Germany’s DAX: -0.5%
- France’s CAC: -0.4%
- Italy’s FTSE MIB: -0.2%
- Spain’s IBEX: -0.6%
- Europe’s STOXX 600: -0.3%
Agenda: China pledges to fight US trade tariffs 'at any cost'
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Investors were left rattled after Donald Trump revealed after markets closed on Thursday night that he was considering imposing new tariffs on $100bn of goods imported from China.
The news threw traders, who had been hopeful that a full-blown trade war could be avoided. China has responded this morning by saying that Beijing would fight the US “at any cost”.
Jasper Lawler from London Capital Group explains how investors reacted to the latest developments:
Trumps announcement of a potential further $100 billion of tariffs on China briskly ended any hopes of an amicable conclusion to escalating trade tensions, initially sent Asian markets tumbling, along with European and US futures sharply lower.
Whilst the knee jerk reaction was a heavy sell off from traders, markets since pared some losses, with Asia closing mixed and Europe still pointing to a lower start but less extreme than when the news broke.
The message from the White House has been mixed at best this week, with White House advisor Larry Kudlow and other officials playing down any trade war fears, which worked to boost the markets. However, much of the good work by Kudlow and co was undone by Trump on Thursday evening, who is showing an increasingly hard-line approach.
Stick with us for all the latest updates on the US/China spat.
Also coming up today is the US non-farm payrolls report for March at 1.30pm BST.
And its day one of the UK’s new tax on sugary drinks.
Updated
