RBS remains a work in progress - Hargreaves Lansdown
The latest RBS stake sale by the UK government could hit the bank’s share price in the short term, says Laith Khalaf, senior analyst at Hargreaves Lansdown:
The RBS share price has bounced back from its slump after the EU referendum, but the taxpayer is still going to be significantly out of pocket as the government sells down its stake. Few argue the RBS bailout was necessary to maintain financial stability, but the cost of that intervention is now starting to emerge.
We will learn more when details of the share price attained in the sale are released. In August 2015 the government sold 5.4% of the bank at £3.30 per share, which the National Audit Office estimated crystallised a loss of £1.1 billion, or £1.9 billion if you include the cost of financing.
RBS has cleared several obstacles which have now unblocked the road to re-privatisation, in particular settling claims for mis-selling mortgage-backed securities in the US. Today’s share sale is good news for private investors in RBS because it is a step towards becoming a normal bank again, though government sales may put downward pressure on the share price in the near term. As a business RBS remains a work in progress, and consequently an investment for recovery investors with a long term investment horizon.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
European markets edge higher
As if to emphasise the market uncertainty facing the RBS share sale - which should be priced overnight after gauging demand from institutions- European markets have lost their early gains. However they still ended, for the most part, in positive territory. The final scores showed:
- The FTSE 100 finished up 39.52 points or 0.51% at 7741.29
- Germany’s Dax added 0.37% to 12,770.75
- France’s Cac climbed 0.14% to 5472.91
- Italy’s FTSE MIB fell 0.45% to 22,009.95
- Spain’s Ibex ended up 1.22% at 9750.3
On Wall Street, the Dow Jones Industrial Average is currently up 186 points or 0.76%.
Updated
Here’s our story on the RBS share sale:
Philip Hammond has restarted the sale of government owned shares in Royal Bank of Scotland, offloading a stake worth almost £2.6bn to City investors.
The chancellor, through UK Financial Investments, which owns RBS stake on behalf of the government, kickstarted the sale of 925 million shares, representing about 7.7% of the bank’s stock.
The government, which will still own a majority stake in RBS almost a decade after the bailout during the financial crisis, said it would reduce the state’s ownership of the bank from about 70.1% to 62.4%.
The disposal marks the first time RBS shares have been sold since the summer of 2015, when George Osborne sold a first tranche at a loss of about £1bn.
The report is here:
This second sale of RBS shares by UK govt will cut taxpayer stake to 62.4%. Current RBS price is 280p vs the average price paid of 502p/shr. In first sale in August 2015 shares were sold at 330p each.
— Steve Slater (@reuterssteves) June 4, 2018
The share sale is due to take place this evening with an offering to institutional investors. Here is the full announcement from UK Government Investments, the body which manages the country’s RBS stake:
UKGI announces that it intends to sell part of HM Treasury’s shareholding in The Royal Bank of Scotland Group plc. The disposal of the Company’s ordinary shares will be by way of a placing to institutional investors.
The price at which the Shares are sold will be determined by way of an accelerated bookbuilding process. The book will open with immediate effect following this announcement.
The Placing is expected to comprise of approximately 925 million Shares, representing approximately 7.7% of the issued ordinary share capital of the Company. As a result of the Placing, the overall size of HM Treasury’s shareholding in the Company will be reduced from approximately 70.1% to approximately 62.4%.
UKGI and HM Treasury have undertaken to the Bookrunners named below not to sell further shares in the Company for a period of 90 calendar days following the completion of the Placing without the prior written consent of a majority (by participation) of the Bookrunners.
Citigroup Global Markets Limited, Goldman Sachs International, J.P. Morgan Securities plc (which conducts its UK investment banking activities under the marketing name J.P. Morgan Cazenove) and Morgan Stanley & Co. International plc have been appointed to act as joint bookrunners in connection with the Placing.
N M Rothschild & Sons Limited is acting as Capital Markets Adviser. Freshfields Bruckhaus Deringer LLP is acting as legal counsel to UKGI in respect of English and US law.
Details of the Placing Price and the number of Shares sold will be announced in due course.
Settlement and delivery of the Shares is expected to take place on 7 June 2018.
Updated
At last week’s annual meeting, the bank’s finance director did not seem keen on the government selling shares at the moment.
UK Government Investments has announced it will place 925m shares in RBS with institutional investors, representing about 7.7% of the bank. The move cuts its stake from the current 71%.
UK government to sell 7.7% of Royal Bank of Scotland
Following last week’s annual meeting of Royal Bank of Scotland , the government has announced it plans to sell £2.6bn worth of shares in the taxpayer-owned bank.
Updated
Wall Street is holding onto its gains but the picture is slightly different in Europe.
Most markets have come off their best levels as we head to the close, while Italy’s FTSE MIB is in negative territory, down 0.33%. Chris Beauchamp, chief market analyst at IG, said:
Stocks have held on to some of their gains today, but the day has not gone entirely the bulls’ way. While Italian concerns have receded from view, trade wars remain the big concern. Given the performance of US equities, which have outpaced their European brethren today, it looks like the market is, for now at least, more concerned that European stocks will be harder hit than their US counterparts. Overall however, risk appetite appears pretty solid for the day, especially when the lack of macro data is factored into the equation. Particularly encouraging has been the continued strength in tech stocks, with the Nasdaq 100 only 1% away from its previous record high.
Markets have peaked - Capital Economics
Despite the renewed trade tensions, markets are making a good start to the week. But this optimism is unlikely to last, says Ingvild Borgen Gjerde at Capital Economics:
Global equities extended their recent rebound on Monday, which has occurred despite renewed tensions between the US and the rest of the world over international trade. We can think of three key reasons why this has happened. None of them, however, is especially reassuring.
The first reason is that investors have acclimatised to Donald Trump’s “megaphone” diplomacy. Despite the tariffs imposed by the US on steel and aluminium imports from the EU, Mexico and Canada, investors presumably see it as a negotiating tactic, rather than the start of a full-blown trade war that could have serious ramifications for economic growth. Although we share this view, the risk of a trade war is greater now than it has been for many years. So at the very least, the risk ought to continue to curb investors’ enthusiasm for equities.
The second reason is that the political situation in Italy has calmed down, as evidenced by the sharp fall in the 10-year government bond yield there since last Tuesday. But while the government sworn in by the president on Friday was arguably more market friendly than many might have feared, we don’t think that Italy’s problems are over and expect yields there to rise once more in due course. If we are right, global equities will probably come under pressure again.
The third reason is that US economic data released on Friday were upbeat, with both the employment report and ISM manufacturing index for May coming in stronger than expected. Although growth in the US economy is likely to remain healthy this year, we think that it will falter in 2019 as monetary tightening bites and fiscal stimulus fades. Growth is also likely to slow elsewhere, if not as rapidly. This is significant because the rally in global equities since mid-2016 has been mainly driven by an upturn in the global economy.
The upshot is that we doubt that the recent rebound in global equities will continue. On the contrary, we think that their peak has already passed, and that they will move gradually lower during the rest of the year and in 2019.
Weak US factory orders in April
US factory goods orders fell by more than expected in April, dragged down by weak demand for aircraft and machinery.
Orders dropped by 0.8%, worse than the forecast decline of 0.5%. This is the worst April since 2012. The March figure was revised up from a 1.6% increase to 1.7%.
The decline could be temporary, however, given some positive manufacturing surveys in May.
Wall Street has followed the global trend, shrugging off trade war fears and moving higher.
The Dow Jones Industrial Average is currently up 187 points or 0.76%, as investors continue to celebrate Friday’s better than expected jobs numbers. The S&P 500 is up 0.45% while the Nasdaq Composite is 0.37% higher.
One of the companies moving higher is Apple, heading closer to a $1trn valuation:
Apple $AAPL shares hit a new record high in early trading...intraday $192.91 so far...market cap ~ $944 billionhttps://t.co/gMxOpCCcf6
— Dominic Chu (@TheDomino) June 4, 2018
Over in Argentina, the International Monetary Fund has said talks about it giving financial support to the country were well advanced:
Alejandro Werner, the IMF’s Director of the Western Hemisphere department, said:
IMF staff and the Argentine authorities have been engaged in a very constructive and close dialogue in response to the authorities’ request for financial support for their economic plan. Talks are well advanced. As we have said all along, this will be a plan driven by the Argentine government’s priorities, with a particular focus on protecting the most vulnerable, and strengthening the local economy in light of the recent financial market turbulence.
Donald Trump has defended his new tariffs, arguing that he is actually fixing the playing field on global trade.
China already charges a tax of 16% on soybeans. Canada has all sorts of trade barriers on our Agricultural products. Not acceptable!
— Donald J. Trump (@realDonaldTrump) June 4, 2018
The U.S. has made such bad trade deals over so many years that we can only WIN!
— Donald J. Trump (@realDonaldTrump) June 4, 2018
The president has been rather active on Twitter this morning. Remarkably, he claimed he has the “absolute right” to pardon himself (but won’t, as he’s done nothing wrong....).
Investors should stay alert; Trump may be heading towards a titanic clash with special counsel Robert Mueller....
IMF running out of time to back Greek bailout
Meanwhile the International Monetary Fund is signalling (finally) that it will not be signing up to Greece’s third bailout programme, which is due to expire this summer.
With less than three months before the debt-stricken county exits its current programme, the Fund says the likelihood of it contributing to the rescue package financially is fading fast. The Washington-based body had promised to boost the programme – Greece’s third since May 2010 - with a €1.6bn credit line if euro area creditors agreed to far-reaching debt relief for Athens.
Talks on the issue, conducted on the sidelines of this weekend’s G7 meeting in Canada, failed to make progress with both the EU and IMF agreeing to return to negotiations later this week in Paris.
Speaking to Greece’s state-run news agency late on Sunday, the Fund’s Greek representative Michalis Psalidopoulos said since the organisation “probably does not have enough time to activate its program” it would continue to contribute only in its capacity as technical advisor.
But Mario Centeno, the Portuguese chairman of the euro group of euro zone finance ministers said the EU is still determined to reach a debt relief deal for Greece by the June 21 euro group – giving it enough time to keep to its planned bailout exit on August 20.
IMF participation is crucial if the deal is to be credible to markets, he told Reuters at the weekend. Talks in Paris on Thursday are likely to explore several options including prolonging maturities on loans from Greece’s second bailout program.
Separately, Greece has taken another step towards normality by relaxing some of the capital controls introduced three years ago:
Good news: The sale of Aunt Bessie’s to Nomad Foods shouldn’t lead to job cuts at its production operation in Hull.
Wayne Hudson, MD of Birds Eye UK, has suggested the 400 jobs at the site should be safe. He told the Hull Daily Mail that:
We have no plans whatsoever to close the factory in Hull.
We will be working with the team there to understand how we can continue the great job they have done.
Wall Street to shrug off trade war fears
The US stock market is expected to follow Europe and Asia’s lead when it opens in two hours time.
The Dow Jones industrial average is on track to gain 140 points, or over 0.5%.
Wall Street is still taking comfort from last Friday’s stronger-than-expected jobs report, which suggests the US economy is in good shape.
Craig Erlam of City firm OANDA explains:
The jobs report on Friday was yet another reminder of how well the US economy is doing and why the Federal Reserve is continuing to tighten monetary policy despite constantly being questioned about the need to do so when inflation is only accelerating at a moderate pace.
Strong job gains combined with a drop in the unemployment rate to 3.8% and a slight uptick in wage growth was welcome at a time when people are generally fretting about the threat posed by an unnecessary trade war.
It’s a little surprising that investors aren’t more concerned about the hoofing delivered to Treasury secretary Stephen Mnuchin at last weekend’s G7 finance minister meeting.
This tweet-thread, from Bloomberg’s Mike McKee, explains just how badly relations between America and the rest have deteriorated:
I’ve covered G7 meetings since 1995. I’ve never seen a country, let alone a G7 member, singled out like this:https://t.co/E2RoBi06ct
— Michael McKee (@mckonomy) June 3, 2018
—thread—
I asked Secretary Mnuchin his reaction. He told me the US, because of tax cuts, still leads the global economy. But he acknowledged the rest of the G7 may disagree.
— Michael McKee (@mckonomy) June 3, 2018
In fact, they do. I spoke to the finance ministers from the rest of the G7, many of the central bankers, the EC and Eurogroup representatives, and senior officials from the IMF. Unanimous that the US is mistaken and will pay a big price.
— Michael McKee (@mckonomy) June 3, 2018
“This is a very severe problem for relations between the European Union and the United States,” German Finance Minister Olaf Scholz told me.
— Michael McKee (@mckonomy) June 3, 2018
“We are very concerned. The economic effects of trade wars are very negative for all,” Bank of Italy Governor Ignazio Visco told me.
— Michael McKee (@mckonomy) June 3, 2018
“It has been a tense and tough G-7. I would say it has been far more a G-6 plus one than a G-7,” French Finance Minister Bruno Le Maire told me.
— Michael McKee (@mckonomy) June 3, 2018
“I think there was a comment out there that this was the G6+1. It was not. It was the G7...” Mnuchin said. He’s spinning. The US is more isolated than I have ever seen it in the more than two decades I have been doing this.
— Michael McKee (@mckonomy) June 3, 2018
It was an astounding and depressing weekend. Trump’s assertion the US is more respected than ever around the world is 180 degrees from the truth. I was, frankly, shocked.
— Michael McKee (@mckonomy) June 3, 2018
There is great anger and frustration around the globe that the world’s largest economy would forfeit its leadership for policies that don’t make economic sense, and that the rest of the G7 don’t understand.
— Michael McKee (@mckonomy) June 3, 2018
William Jackson Food Group chairman Nicholas Oughtred says Aunt Bessie’s could have a great long-term future under its new owners:
“Aunt Bessie’s has come a long way with us. We’ve invested heavily in developing the business and the brand, and Nomad Foods is well placed to take the business even further. Nomad Foods is a well-known food group with a strong commitment to the frozen category, incredible experience, scale and investment capabilities and I’m sure Aunt Bessie’s will continue to thrive.
“We are exceptionally proud of everyone who works at Aunt Bessie’s and are grateful to them for helping it become the much-loved household name that it is today.”
Yorkshire-pudding maker Aunt Bessie’s sold for £210m
Newsflash: Where there’s puds, there’s brass!
Aunt Bessie’s, maker of frozen Yorkshire puddings and roast potatoes has just been sold to Nomad Foods, for the princely sum of €240m (£210m).
Nomad already owns Birds Eye, Findus, Iglo and Goodfella’s, so this deal helps to tighten its grip on Britain’s frozen foods aisles.
In a statement just released, Nomad say that acquiring Aunt Bessie’s will expand their portfolio into the “major eating occasion” of roast dinners.
Stefan Descheemaeker, Nomad Foods’ Chief Executive Officer explains:
Aunt Bessie’s significantly expands our presence within potatoes, one of the largest categories in frozen food, while adding another dimension to our growing portfolio in the United Kingdom.”
Aunt Bessie’s is being sold by William Jackson & Son Limited (which also owns veg box supplier Abel & Cole).
Back in 2015, CEO Norman Soutar explained that the company appealed to cooks who fear getting their roast puds and spuds wrong [one trick is to get the oil really hot....]
Is there anything better than Fish and Chip Friday? We don't think so, which is why we've teamed up with Birds Eye for this bundle deal https://t.co/uljUlhomRt pic.twitter.com/RlDDtnLWyj
— Aunt Bessie's (@AuntBessies) May 25, 2018
Britain’s stock market continues to shrug off the trade war anxiety.
The FTSE 100 is now up 61 points, or 0.8%, at 7762 - a one-week high. United Utilities, Severn Trent and easyJet are all topping the risers, after City analysts raised their price targets for their respective shares.
UK cardboard box maker DS Smith is also in demand. Its shares are up 3% after announcing a £1.7bn takeover of Spanish packaging rival Europac.
Back in the markets, Italian government is recovering in value this morning - pulling down the yield (or interest rate) on the debt.
That shows that fears that Italy might quit the euro are fading, after its new populist government was sworn in last week.
ITALIAN/GERMAN 10-YEAR BOND YIELD GAP AT ITS TIGHTEST IN A WEEK AT 210 BASIS POINTS pic.twitter.com/r69TFnP2zQ
— *Walter Bloomberg (@DeItaOne) June 4, 2018
But... the coalition between the League and the Five Star Movement is surely heading for clashes with Brussels over their spending and migration plans.
Last weekend, Five Star leader Luigi Di Maio said he hoped to introduce a universal basic income for poorer Italians while League’s leader Matteo Salvini vowed to cut spending on asylum seekers and deport migrants.
The sharp decline in eurozone investor confidence may be a sign that Europe’s economy is faltering.
Here’s some snap reaction from economists:
🇪🇺Euro area Sentix investor confidence fell sharply in June on the back of the political crisis in Italy (biggest one month drop since Sep 14). May be a signal that PMI manufacturing is heading further south.....? Momentum has turned around in Europe $EURUSD #Italycrisis pic.twitter.com/vcFaZslvST
— Danske Bank Research (@Danske_Research) June 4, 2018
#Euroboom to #eurogloom? Check out the change from 2017 to now in Sentix's gauge of investor sentiment on the euro zone economy. https://t.co/DcJHTY3BRP pic.twitter.com/S8LkqnkGno
— Ritvik Carvalho 📉 (@ritvikcarvalho) June 4, 2018
The economic outlook in Germany fell by 6 points to -13.8, its lowest level in six years, according to the Sentix sentiment survey among investors. The US trade dispute and trouble in key sectors, like cars and banking, led to the drop. @sentixsurvey #tradewar #germancars
— Handelsblatt Global (@HandelsblattGE) June 4, 2018
Eurozone investor morale tumbles to 20-month low
Investor optimism across the eurozone has fallen to its lowest level since October 2016, thanks to trade war fears and the Italian political crisis.
That’s according to Sentix, the German research group.
Sentix’s index of eurozone investor morale has tumbled to just 9.3 this month, down from 19.2 in May. That’s much worse than expected, and extends the index’s recent losses.
Sentix investor confidence index
— FXAce (@Zoukers) June 4, 2018
欧州 pic.twitter.com/Hw5cGjEPXl
Investors told Sentix they are less optimistic about future prospects, and that current conditions have deteriorated.
Last month’s chaos in Italy over its new government helped to drag down economic prospects in the eurozone, says Manfred Hübner, managing director at Sentix. He added:
“The new government in Italy is causing great concern about the euro zone among investors.”
Hübner added that investors are also concerned about America’s “punitive tariffs”, while still hoping that a full-blown trade war can be avoided.
Howard Archer of EY ITEM Club is disappointed that Britain’s construction PMI was unchanged at 52.5 last month.
He says it’s a sign that building firms are struggling to gain any momentum:
Fuelling concerns about the construction sector’s difficulties in building momentum, new orders contracted anew in May, confidence was at a 7-month low and employment growth slowed. This suggests that a marked upturn in construction activity is likely to remain conspicuous by its absence
The construction sector’s difficulties in recent months has clearly been influenced by economic and Brexit uncertainties fuelling clients’ caution over committing to new projects. Lacklustre economic activity in some sectors of the economy (such as retail) has also weighed down on construction, as has a shortage on new infrastructure projects. It is also evident that construction sector has suffered from some fall-out from the collapse of Carillion early in the year.
UK construction held back by Brexit fears
Newsflash: Britain’s builders are suffering from political uncertainty, which has helped to undermine new business opportunities.
The monthly survey of UK construction, from data firm Markit, shows that new order books shrank in May, for the fourth time in five months.
Optimism about growth prospects also shrank, to a seven-month low, with bosses blaming fears of political and economic uncertainty.
This dragged back growth in housebuilding and civil engineering last month, although commercial construction accelerated.
This left Markit’s construction PMI, which measures activity, unchanged at 52.5 (any reading over 50 shows growth).
Sam Teague, economist at IHS Markit, says UK building firms are making an ‘underwhelming’ recovery from the snow-related disruption last winter.
“Inflows of new business slipped back into decline, signalling the resumption of the downward trend in demand seen during the opening quarter. Companies frequently noted that Brexit uncertainty and fragile business confidence led clients to delay building decisions in May.
“With new order books deteriorating and cost pressures picking back up, it’s not surprising to see construction firms taking a dimmer view of prospects and pulling-back on hiring, all of which makes for a shaky-looking outlook.”
Updated
Donald Trump loves tweeting about rising stock markets, so he’ll be delighted that trade war fears haven’t sparked a wave of sell orders.
Rebecca O’Keeffe, head of investment at interactive investor, reckons today’s mild market reaction will encourage Trump to stick to his guns.... but the rally could end in tears:
The two main benchmarks President Trump appears to use to gauge the success of his policies are his grassroot supporters and the US equity market. His blue-collar followers are hugely supportive of tariffs, and with equity markets currently also choosing to dismiss the problem and in positive territory, this is reinforcing President Trump’s view that he is doing the right thing, making it less likely that he will back away from his current stance.
This chicken and egg position, where markets don’t believe that tariffs are a credible threat, combined with President Trump’s position that markets are not worried about the issue could lead to an unpleasant reality for both sides eventually. However, for the moment investors are benefitting from positive sentiment.
Updated
France’s president, Emmanuel Macron, could have a showdown with Donald Trump over trade at this week’s G7 summit, according to French officials.
The work agenda for the G7 summit in Quebec, Canada this week has been complicated by the United State’s stance on trade, climate change and foreign policy, a source at the French president’s office said on Monday.
“The U.S. position on certain issues could make negotiations on the final conclusion (of the summit) tricky,” the source said, citing foreign policy moves such as the U.S. withdrawal from the Iran nuclear deal and the transfer of the U.S. Embassy in Israel to Jerusalem.
The source said President Emmanuel Macron and U.S. President Donald Trump could hold talks on the sidelines of the summit.
FRENCH PRESIDENT MACRON AND TRUMP EXPECTED TO HOLD TALKS ON SIDELINE OF G7 SUMMIT - ELYSEE PALACE SOURCE
— Nour E. Al-Hammoury (@NourHammoury) June 4, 2018
The latest trade war tensions have had ‘remarkably little’ impact on the markets, says Connor Campbell of City firm SpreadEx:
Carrying over last Friday’s robust relief rally, investors continued to ignore the trade tensions sprouting out of the US in favour of celebrating the improved political situation in the Eurozone.
A feisty G7 meeting over the weekend, with US Treasury secretary having to fend-off his furious European and Canadian peers as they vented about last week’s tariff announcement from Trump, and news that the US and China made no progress in their latest negotiations, had remarkably little impact on Monday’s trading.
Kit Juckes, currency expert at Societe Generale, says there are plenty of events that could spook the markets this week.
The list includes this week’s G7 leaders meeting, central bank meetings in Turkey and Australia, a confidence vote for Italy’s new populist government, and further trade war developments.
But, the strength of Friday’s US jobs data may set the tone for the start of the week, he adds.
Europe’s biggest stock markets have all opened higher, as traders take their cue from last Friday’s strong US jobs report:
European stock markets are rallying, despite the double-dose of trade war worries.
In London, the FTSE 100 has gained 37 points (or 0.5%) in early trading to 7740.
Europe’s Stoxx 600 index, which tracks Europe’s largest companies, is also 0.5% higher.
Two banks, France’s Societe Generale and Italy’s Unicredit, are leading the rally following reports they are considering a merger.
Morning EU Movers: Air France shares gain altitude
— RANsquawk (@RANsquawk) June 4, 2018
Air France +6.2%
UniCredit +3.5%
Lufthansa +2.5%
SocGen +2.3%
FTSE MIB +1.2%
Accor -1.5%
No progress in US-China talks
In another worrying development, talks between America and China over trade have ended without a breakthrough.
U.S. Commerce Secretary Wilbur Ross and Liu He, China’s economic czar, led the weekend negotiations in Beijing over the weekend. The talks centred on China’s promise to buy more American agricultural and energy products, to help lower the US trade deficit.
Negotiators have hit a sticking point - Beijing won’t sign up to buy more US goods until the Trump administration have promised not to impose further tariffs on Chinese exports.
The US, though, want China to make the first move.
This has raised the danger that talks collapse, and that both sides impose tariffs on $50bn of each other’s exports.
The New York Times says:
“If the United States introduces trade measures, including an increase of tariffs, all the economic and trade outcomes negotiated by the two parties will not take effect,” China said in a statement distributed by the state-controlled news media.
The apparent impasse left the Trump administration with the issue of what to do about China’s industrial policies. It also left unresolved an awkward issue for both sides: the Chinese telecommunications company ZTE, which had violated sanctions against North Korea and Iran.
China ends trade talks with Trump administration in Beijing Sunday without any announced deals.
— Chad P. Bown (@ChadBown) June 3, 2018
Chinese officials refuse to commit to buying more American goods without Trump agreement not to impose further tariffs on Chinese exports.
By @KeithBradsher https://t.co/vFhOqhyexZ
France: G7 meeting was tense
France’s finance and economy minister was particularly scathing about America’s new tariffs on certain imports, including steel and aluminium from Europe.
Bruno Le Maire revealed that last weekend’s G7 finance ministers meeting was much chillier than usual, saying:
“It has been a tense and tough G7 - I would say it’s been far more a G6 plus one than a G7.
“We regret that our common work together at the level of the G7 has been put at risk by the decisions taken by the American administration on trade and on tariffs.”
Updated
The agenda: Trade war fears, and UK construction data
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Fears of a global trade war are looming over the financial markets as investors return to their desks for the new week.
Over the weekend, the world’s top finance ministers lined up to criticise America’s new tariffs on steel and aluminium imports, at a G7 meeting in Canada.
US Treasury secretary Stephen Mnuchin faced a barrage of attacks, with fellow ministers warning that “collaboration and cooperation” between the G7 was now at risk.
The official statement following the meeting is remarkably blunt, stating that:
Concerns were expressed that the tariffs imposed by the United States on its friends and allies, on the grounds of national security, undermine open trade and confidence in the global economy.
Finance Ministers and Central Bank Governors requested that the United States Secretary of the Treasury communicate their unanimous concern and disappointment.
Attendees had a “frank exchange” on the benefits of an open rules-based trading system -- which is a diplomatic way of saying there were verbal fisticuffs.
The statement concluded by saying that “most” G7 finance ministers and Central Bank governors regret the uncertainty created by America’s trade actions, which threatens global co-operation.
The international community is faced with significant economic and security issues, which are best addressed through a united front from G7 countries. Members continue to make progress on behalf of our citizens, but recognize that this collaboration and cooperation has been put at risk by trade actions against other members.
The issue is certain to dominate the upcoming meeting of G7 leaders later this week.
The markets, though, are holding their nerve. Shares have risen in Asia overnight, with Japan’s Nikkei gaining almost 1.4% - its best day in six weeks.
European markets are also expected to rally, following last Friday’s strong US employment data - which showed a pick-up in wage growth and job creation.
Jasper Lawler of London Capital Group says this has cheered investors:
Wall Street ended the previous week on a positive footing, lifted by a better than expected US jobs report; 223k jobs created in May vs. expectations of 200k, unemployment unexpectedly fell to an 18 year low of 3.8% and wages managed to creep up to 2.7%, better than the 2.6% forecast and a 4-month high.
The solid jobs report overshadowed any trade war concerns which had been brewing and lifted the S&P over 1%.
European Opening Calls:#FTSE 7724 +0.29%#DAX 12769 +0.35%#CAC 5485 +0.36%#MIB 22331 +1.00%#IBEX 9667 +0.35%
— IGSquawk (@IGSquawk) June 4, 2018
#FTSE100 called +25 at 7525 pic.twitter.com/VtwAsB0pH8
— Mike van Dulken (@Accendo_Mike) June 4, 2018
Coming up today, we get a new healthcheck on Britain’s construction sector - which suffered a fall in output earlier this year, plus US factory orders and eurozone construction data.
The agenda:
- 9.30am BST: UK construction PMI for May
- 10am BST: The Sentix survey of eurozone investor confidence
- 3pm BST: US factory orders for April
Updated
