Closing summary
Global stocks are sliding again, spooked by fears that the prolonged trade war between the US and China could push the world economy into recession. This has sparked a rush into the safety of assets such as the Japanese yen, gold and US government bonds.
- Dow Jones down 0.81% at 26,074
- S&P 500 down 0.63% at 2,899
- Nasdaq down 0.64% at 7,908
- UK’s FTSE 100 down 0.33% at 7,229
- Germany’s Dax down 0.13% at 11,678
- France’s CAC 40 down 0.36% at 5,311
- Italy’s FTSE MiB down 0.17% at 20,290
Goldman Sachs said over the weekend that fears of the US-China trade war leading to a recession were increasing, and reiterated that it no longer expected a trade deal between the world’s two biggest economies before the 2020 US presidential election. It cut its fourth-quarter US growth forecast to 1.8% due to the trade war.
The pound has recovered after hitting a 10-year low against the euro overnight. It is up 0.46% at $1.2091 and 0.33% higher against the euro at €1.0779.
Thank you for all your comments. We’ll be back tomorrow.
Argentina's peso slumps 25% on election results
Argentina’s peso has slumped 25% and the country’s bonds fell in London trading after voters rejected president Mauricio Macri’s austere economic policies in primary elections, casting doubt on his chances of re-election in October, Reuters reports.
Opposition candidate Alberto Fernandez - whose running mate is former president Cristina Fernandez de Kirchner - won by a wider-than-expected 15.5 percentage points with 47.65% of votes, with 99% of ballots counted after Sunday’s primary.
Fernandez’s lead far exceeded the margin of 2-8% forecast in recent opinion polls.
Argentina is in recession with inflation at over 55% after three and a half years of Macri’s policies. Investors nonetheless see the Fernandez/Kirchner duo as a riskier prospect than free-markets advocate Macri.
Kirchner imposed strict currency controls that slammed investment during her 2007-2015 administration. She feuded with the country’s key farm sector over export taxes and presided over a multi-year standoff with bondholders that kept Argentina locked out of the international capital markets.
Argentina’s 2028-maturing, euro-denominated bond was down almost 9 cents in European trading on Monday, Tradeweb data showed.
The peso had plunged 6.1% to 49 per U.S. dollar early Monday on the platform of digital brokerage firm Balanz, which operates the currency online non-stop.
Argentina's peso collapses 25% at the open to 60.00/$ after opposition candidate Alberto Fernandez - whose running mate is former president Cristina Fernandez de Kirchner - trounces President Macri in Sunday's election primary, traders say.
— Jamie McGeever (@ReutersJamie) August 12, 2019
Updated
Wall Street slides at the open
Wall Street has opened lower, as expected.
- Dow Jones down 174 points, or 0.66%, at 26,112 in early trading
- S&P 500 down 15 points, or 0.54%, at 2,902
- Nasdaq down 49 points, or 0.62%, at 7,910
In London, the FTSE 100 index is 0.3% lower at 7,231.
The City regulator has begun “wide-ranging enquiries” following the US hedge fund Muddy Waters’ attack on the UK-listed Burford Capital last week that sent its shares plummeting by 65% in 24 hours, writes Patrick Collinson, the Guardian’s Money editor.
In what is fast becoming one of the most extraordinary financial battles in recent years, Muddy Waters – a so-called short seller, which makes money when share prices fall – made a string of accounting and poor management allegations against Burford, a business that specialises in providing funding for lawsuits.
Burford hit back on Monday with a detailed analysis of what it said was “evidence consistent with illegal market manipulation” and said it had informed both regulators and “criminal prosecutors”. It added that it had been a victim of sophisticated selling techniques, called “spoofing” and “layering”, to artificially drive down its share price.
In other corporate news, Mike Ashley’s future son-in-law, Michael Murray, who has been tasked with sprucing up Sports Direct’s leisurewear emporia, says it will take four years to transform the brand into the Selfridges of sportswear.
Mike Bird, the Wall Street Journal’s Hong Kong-based reporter, is reporting from the airport, which remains closed. All flights have been cancelled for Monday.
Crowds for trains getting really thin, but still some passengers lingering. Plenty of protesters still here, not clear what happens when all the travelers are gone. Haven't seen a single police officer.
— Mike Bird (@Birdyword) August 12, 2019
Meanwhile, in Australia....
SNOW DAY: Motorist captures stunning scene as kangaroos bound through blanketed fields in Australia's rural Curraweela. https://t.co/NJaD0YNROg pic.twitter.com/eDYDI0v11u
— ABC News (@ABC) August 12, 2019
US stocks are expected to slide when the opening bell rings on Wall Street at 2.30pm BST.
Stock futures suggest the Dow Jones will open 144 points lower, or 0.55%, while the S&P 500 is set to fall 16 points, or 0.56%, and the Nasdaq is seen losing 47 points, or 0.62%.
Markets continue to be haunted by fears over the impact of the prolonged US-China trade war on the world economy, and there has been a rush into the safety of gold, the Japanese yen and US government bonds.
UK households' job fears rise
British households are more worried about losing their jobs than at any time in the past five and a half years, according to official figures released today, in a sign of the pressure on workers across the country, writes our economics correspondent Richard Partington.
Despite unemployment falling to the lowest point since the mid 1970s, the Office for National Statistics said that people’s expectations for rising joblessness in the year ahead have been climbing.
According to consumer confidence surveys used by the government statistics agency to compile a dashboard of economic wellbeing, expectations of rising unemployment have hit the highest level since June 2013.
The findings come as Brexit looms and the risks of recession mount. Faced with the threat of a disorderly no-deal departure at the end of October and a global economic slowdown, the UK economy contracted in the three months to June for the first time since 2012, putting the country on the brink of recession. Two consecutive quarters of contraction are regarded by economists as a recession.
Updated
Hong Kong stocks are likely to fall when the market opens, stock futures suggest. The airport is closed as anti-government protests in the former British colony entered their tenth week.
The UK government is concerned about the latest violence in Hong Kong and urged the city’s government to engage with all parties in constructive dialogue, according to a spokesman for prime minister Boris Johnson.
The luxury fashion label Versace apologised to China yesterday after one of its T-shirts was criticised for identifying the semi-autonomous regions of Hong Kong and Macau as countries.
The T-shirts caused outrage on social media sites in China, and the fashion house, which was acquired by Michael Kors last year, said the shirts had been removed from sale and destroyed. It stated on Weibo:
It’s our company’s negligence and we express deep apology for the impact it caused. Versace reiterates that we love China and resolutely respect China’s territory and sovereignty.
The Company apologizes for the design of its product and a recall of the t-shirt has been implemented in July. The brand accepts accountability and is exploring actions to improve how we operate day-to-day to become more conscientious and aware. pic.twitter.com/5K8u3c4Dbm
— VERSACE (@Versace) August 11, 2019
Mixed messages at the airport pic.twitter.com/ZhQvwVooYq
— Mike Bird (@Birdyword) August 12, 2019
Updated
The yen has also surged, as the rush to safety continues. The Japanese currency is at its highest level in more than 1 1/2 years against the dollar, up 0.55% at 105.08 yen.
#EURGBP corrects lower after hitting 10 year high https://t.co/6qPmMx7cn7 pic.twitter.com/yHip5mMFqP
— City Index (@CityIndex) August 12, 2019
Morning summary
The pound has staged a recovery after hitting a 10-year low against the euro overnight, of €1.0724 (disregarding the flash crash in October 2016). It is currently 0.37% higher against the dollar at $1.2084, and 0.46% higher against the euro at €1.0794.
Sterling fell earlier after a warning from a UK think tank, the Institute for Government, that a no-deal Brexit is looking increasingly likely on 31 October, given the lack of time to secure a new agreement with the EU and the diminishing number of ways in which MPs could block such a process.
Oil prices are declining as markets assume a global economic slowdown will lead to weaker demand: Brent crude is down 1.04% at $57.92 a barrel.
The International Energy Agency lowered its oil demand forecasts on Friday after sluggish demand in the first five months of 2019, the smallest increase in that period since 2008. It warned that the global slowdown and an escalation of the US-China trade war “could lead to reduced trade activity and less oil demand growth”.
Gold, a safe-have asset, is holding above $1,500 an ounce: Spot gold has gained 0.56% to $1,506 an ounce.
European stock markets have reversed earlier gains and are now in the red, as traders fret about the state of the world economy and trade wars.
- UK’s FTSE 100 down 36 points, or 0.5%, at 7,217
- Germany’s Dax up 0.01% at 11,694
- France’s CAC 40 down 0.25% at 5,314
- Italy’s FTSE MiB down 0.21% at 20,282
- Spain’s Ibex down 0.5% at 8,713
Wall Street is also expected to open lower.
Futures sliding https://t.co/lTFEHJRaSs pic.twitter.com/qO2pj5IUe5
— Joe Weisenthal (@TheStalwart) August 12, 2019
Updated
Global trade disruption is a symptom of a deeper malaise, writes Mohamed El-Erian, chief economic adviser at Allianz and a former deputy director at the IMF, in the Guardian.
It is only a matter of time until the escalating tensions between China and the US prompt many more economists to warn of an impending global economic recession coupled with financial instability.
On 5 August, Bloomberg News said that the yield curve, a closely watched market metric, “Blares Loudest US Recession Warning Since 2007”. And Larry Summers, a former US treasury secretary who was also closely involved in crisis-management efforts in 2008-09, recently tweeted: “We may well be at the most dangerous financial moment … since 2009.”
European shares have gone into the red.
- UK’s FTSE 100 down 16 points, or 0.23%, at 7,237
- Germany’s Dax down 0.03% at 11,690
- France’s CAC 40 down 0.34% at 5,309
- Italy’s FTSE MiB down 0.05% at 20,314
Gold rises; shares and oil down
Gold prices have risen again this morning, beyond $1,500 an ounce (it went through this level last Wednesday for the first time since April 2013). Spot gold is up 0.6% at $1,505 an ounce. Gold is seen as a safe-haven investment in times of turmoil.
Markets remain nervous, as traders worry about a global economic slowdown and the trade war between the US and China. Shares across Europe have gone into decline after opening higher this morning.
Oil prices are also continuing their decline. Brent crude is 0.84% lower at $58.04 a barrel.
Updated
Here is our full story on Thomas Cook.
Sterling recovers after hitting 10-year low vs euro
Sterling has recovered, after hitting a ten-year low against the euro overnight, pressured by recession and Brexit fears. Official data showed on Friday that the economy shrank by 0.2% in the second quarter of 2019, stoking fears that the UK could be heading for its first recession in a decade. (A recession is defined as two or more consecutive quarters of economic contraction.)
The pound is now trading 0.5% higher against the euro at 92.60p, after plunging to 93.26p against the single currency late on Sunday, the lowest it has been since October 2009, disregarding the flash crash in October 2016. It also fell to a 31-month low of $1.2015 against the dollar.
Sterling is now 0.27% higher versus the dollar at $1.2071.
Updated
Morning news round-up
Here is a round-up of this morning’s other news.
- There are now three FTSE 350 companies left with no women on its board, after the Swiss-headquartered mining company Ferrexpo appointed Fiona MacAulay as an independent director and chair of its remuneration committee. She is a chartered geologist with more than 30 years’ experience in the oil and gas sector, and chairs Independent Oil & Gas.
- Shares in Thomas Cook, the world’s oldest travel company, plunged as much as 20% and are now down nearly 16% at 8.18p. The troubled firm confirmed it is looking to raise another £150m from investors, on top of the £750m it has already asked for, to stave off a cash crunch by Christmas.
- The woes on the British high street continue: there was a big decline in the number of people visiting shops in July and the number of empty shops hit a four-year high. The latest figures from the British Retail Consortium and Springboard show the national town centre vacancy rate rose to 10.3% in July, the highest since January 2015. Footfall declined by 1.9%, the worst fall for July since 2012.
- Britons have spent £4bn stockpiling goods as fears of a no-deal Brexit have risen, new research suggests. One in five people are hoarding food, drinks and medicine, spending an extra £380 each, according to a survey by the finance provider Premium Credit.
Updated
Cathay Pacific shares fall; Hong Kong airport authority cancels flights
Shares in Cathay Pacific, Hong Kong’s flagship carrier, fell 4.85% in Hong Kong today after the company bowed to pressure from China and sacked two airport staff for alleged misconduct. It also suspended a pilot on 30 July who is accused of taking part in the Hong Kong protests.
The company reiterated that it had to comply with a new directive from Beijing banning all staff who support the protests from working on flights to the mainland or through its airspace. China’s aviation regulator has ordered the airline to hand over identifying information for staff on mainland-bound flights effective immediately.
Cathay’s chief executive Rupert Hogg sent another message to staff today, after emailing them on Saturday.
We are all obliged to abide by law at all times. Cathay Pacific Group has a zero tolerance approach to illegal activities.
Specifically, in the current context, there will be disciplinary consequences for employees who support or participate in illegal protests. These consequences could be serious and may include termination of employment.
He called on staff not to “support or participate” in today’s protests at the airport.
The Hong Kong airport authority has cancelled all flights not yet checked in for today, as anti-government protesters demonstrated peacefully at the airport for a fourth day.
Protests in the city have entered a tenth week, and have descended into violence across the city as police fired teargas at protesters and beat them with batons.
Updated
European stock markets are enjoying a bit of respite, after two weeks of losses. The Chinese central bank fixed the Chinese yuan above the seven-to-one-dollar mark for the third trading day in a row, but the latest fixing was stronger than traders expected.
The yuan weakened through that level for the first time since May 2008 a week ago, prompting US president Donald Trump to label China a currency manipulator – an accusation that was firmly rejected by Beijing.
Michael Hewson, chief market analyst at CMC Markets UK, says:
While the direction of travel is clear and that the yuan is likely to weaken further, it would appear that as long as the decline happens gradually, markets are more likely to be comfortable with it.
The FTSE 100 in London has turned negative, however, trading down 3 points, or 0.05%, at 7,250. It had opened 0.5% higher. On the continent, shares are still pushing higher.
- Germany’s Dax up 0.34%
- France’s CAC 40 up 0.38%
- Italy’s FTSE MiB up 0.18%
- Spain’s Ibex down 0.06%
Here is our story on Aramco. My colleage Jasper Jolly writes:
Aramco will broadcast a briefing on its results for the first time ever on Monday afternoon, at 2pm BST, as it increasingly looks to engage with international investors. The Saudi crown prince, Mohammed bin Salman (or MbS), has made diversifying Aramco away from a dependence on oil production a key part of his plan for the next decade in the nation’s economy.
Aramco offered a rare glimpse into its finances in April when it sold $12bn of bonds to investors. Today’s half-yearly earnings report lifts the lid on the Saudi state-owned company’s latest financial performance, and will be followed by its first-ever investor call at 2pm BST.
The move comes as Saudi Arabia wants to list 5% of the company which would raise $100bn, at the target valuation of $2tn, within the next two years. This would dwarf Alibab’s $25bn IPO in September 2014, which was the biggest-ever float on Wall Street.
The gulf state’s standing in the international investment community was dealt a blow last year after an outcry over the murder of the journalist Jamal Khashoggi at the hands of Saudi agents. But Aramco’s $12bn bond sale in April attracted record demand from investors.
Updated
Aramco, officially called the Saudi Arabian Oil Company, is the world’s biggest supplier of oil. It produced 10m barrels of crude oil a day between January and June, far above its American rival ExxonMobil, which pumped 3.9m a day.
The company has also taken a 20% stake in the oil refinery and chemicals business of India’s Reliance Industries.
Mukesh Ambani, the Reliance chairman and managing director who is also Asia’s richest man, announced the deal at the Indian company’s annual meeting in Mumbai today. As part of the deal, Aramco will supply 500,000 barrels a day of crude oil to Reliance’s twin refineries at Jamnagar in Gujarat. It is India’s biggest foreign investment to date.
Updated
Good start to the week for European shares
It’s a better start to the week for European shares, after last week’s turbulence – caused by Donald Trump’s attack on alleged “currency manipulation” by China. Things settled down later in the week.
- UK’s FTSE 100 up 38 points, or 0.5%, at 7,291
- Germany’s Dax up 0.9%
- France’s CAC 40 up 0.9%
- Italy’s FTSE MiB up 0.6%
- Spain’s Ibex up 0.47%
Introduction: Saudi Aramco to host first-ever earnings call
Good morning and welcome to our rolling coverage of business, markets and economics in the UK and the Eurozone.
Saudi Arabia’s secretive state-owned oil company has made a $47bn profit for the first half, cementing its position as the world’s most profitable company.
Saudi Aramco will host its first-ever earnings call with investors and analysts today (a webcast at 2pm BST) – as it works towards a $2tn stock market flotation, planned within the next couple of years.
Saudi Arabia recently revealed that the float is back on, after putting it on hold several months ago. The IPO is a key part of Saudi plans for an economic transformation by privatising part of its vast oil wealth and opening the kingdom to international investment, and lessening its reliance on oil.
Saudi Aramco’s profit of $46.9bn in the six months to 30 June is down from $53bn a year earlier, however, due to lower oil prices. You can read the results here.
Last year, Aramco racked up profits of $111.1bn to overtake Apple, dwarfing every other corporation in the world. Apple, the world’s largest listed company, made $59.5bn (excluding one-off items) in 2018 while ExxonMobil, the largest US oil company, made $20.8bn.
Brent crude, the global benchmark, dipped 0.4% to $58.30 a barrel this morning while US crude lost 0.4% to $54.3 a barrel.
Saudi Aramco’s president & chief executive Amin H. Nasser said:
Despite lower oil prices during the first half of 2019, we continued to deliver solid earnings and strong free cash flow underpinned by our consistent operational performance, cost management and fiscal discipline.
Disclosing our financial results for the first time, as part of our $12bn debut international bond issuance, marked a significant milestone in Saudi Aramco’s history.
Asian stock markets are mixed, with worries over the US-China trade war lingering. Japan, Singapore and India are closed for holidays.
On Friday, comments from Donald Trump that Washington was continuing trade talks with China but would not make a deal for now drove a late sell-off on Wall Street.
European shares are expected to open higher, with stock futures suggesting 0.6% gains for the UK’s FTSE 100 index and Germany’s Dax. Sterling is flat against the dollar and the euro, at $1.2041 and €1.0748.
It’s August, and the economic calendar is very light.
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