Closing summary
A degree of calm has returned to world stock markets, after heavy selling earlier this week amid fears that the one-year trade war between the US and China was turning into a full-blown currency war. Washington branded Beijing a currency manipulator after the yuan fell sharply beyond the seven-to-one-dollar mark on Monday. This led to turmoil in financial markets – and US and UK stocks had their worst day this year.
Investors have been cheered today by better-than-expected trade data from China and the stabilisation of its currency. Wall Street has opened higher. In Europe, shares are even further ahead.
- UK’s FTSE 100 up 0.64% at 7,245, a gain of 45 points
- Germany’s Dax up 1.07% at 11,774
- France’s CAC 40 up 1.59% at 5,350
- Italy’s FTSE MiB up 0.91% at 20,724
- Spain’s Ibex up 1% at 8,833
Gold, considered a safe-haven investment, is still trading near $1,500 an ounce, however, as nervousness lingers. It is at $1,496, down 0.33%.
Thank you for all your comments. Good-bye – we’ll be back tomorrow to track the latest developments in markets and the business world.
Updated
Wall Street rises
On Wall Street, stocks are up after the opening bell, mirroring gains in the UK, where the FTSE 100 index is 0.7% ahead at 7,250.
- Dow Jones up 117 points, or 0.45%, at 26,124
- S&P 500 up 16 points, or 0.56%, at 2,900
- Nasdaq up 58 points, or 0.74%, at 7,920
In continental Europe, the main indices have recorded bigger gains, of 1% to 1.6%.
Gold pulls back after sharpest daily gain in 7 weeks but holds above $1,500 https://t.co/lnRzEbdH4z
— MarketWatch (@MarketWatch) August 8, 2019
Eurozone support for euro hits record high
More than three quarters of Europeans (76%) are in favour of the single currency – the highest level of support ever recorded, according to the latest Eurobarometer survey, conducted after the European elections between 7 June and 1 July in all 28 EU countries and five candidate countries. In the EU as a whole, support for the euro is stable at 62%.
The other main finding is that climate change has turned into the second top concern among EU citizens, after immigration.
Support for the euro hit another record high. 76% of citizens in the eurozone are in favour of a European economic and monetary union with one single currency – the euro – the latest Eurobarometer survey shows. Full results here https://t.co/huG2Al3Zm3 pic.twitter.com/y3YrNMHYD1
— European Central Bank (@ecb) August 8, 2019
US jobless claims fell last week
Jobless claims in the US fell to 209,000 in the week to 3 August from 217,000, a better than expected outturn. The official data add to other evidence that the US economy remains in robust shape.
The four-week average rose slightly to 212,250 from 212,00.
Updated
Ryanair strikes: what you need to know
As hundreds of thousands of Ryanair passengers wait to hear whether their flights will be cancelled during five days of planned pilot strikes during the peak summer holiday period, we answer some of the key questions.
Here is another good piece, by the Independent’s travel correspondent Simon Calder. And my colleague Miles Brignall on Guardian Money has pulled together a quick guide to your rights when flights are cancelled or delayed.
When an airline starts cancelling or delaying flights for more than three hours, passengers are entitled to compensation of €250-€600 (£230-£550) under EU rules.
The cause of the problem has to be under the airline’s control and not an ‘extraordinary circumstance’. Lack of planes/staff, flight overbooking, a strike by airline staff or an IT failure are all considered to be within the airline’s control – so compensation is payable.
Passengers on cancelled short-haul flights – up to 1,500km – are entitled to €250 or £230. For flights of 1,500km-3,500km, passengers are entitled to €400, and €600 for the longest flights (more than 3,500km).
Compensation is also payable if the plane is delayed. The payments are the same but only kick in when the plane has been delayed three hours for short flights or four hours for the longer trips. The delay is calculated against the time the plane was due to arrive.
Passengers are also entitled to ‘assistance’ under the EU rules. Short-haul passengers should receive food and water after two hours. Mid-distance passengers get help after three hours, while long-haul passengers receive it after they have been held in the terminal for four hours. If the delay is overnight, passengers should be provided with hotel accommodation but this often does not happen. This assistance should be provided irrespective of whether the delay is the airline’s fault.
The airlines have fought these compensation rules since they were introduced and passengers have had to go to court to get their money. The airlines frequently blame delays on events outside their control. Freak weather events or a last-minute strike by air traffic controllers are deemed to be outside their control. A lack of planes or staff is not.
The rules only apply to EU-based airlines or all flights that start in the EU on non-EU based carriers. What will happen after Brexit is not yet clear. Miles Brignall
Updated
Here is our story on Savills, which warned today that the UK housing market is at the weakest point since the global financial crisis a decade ago, as Brexit uncertainty puts off buyers.
My colleague Jasper Jolly writes:
Savills, which sells and manages commercial and upmarket residential property around the world, said it had sold fewer houses in the UK in the first half of 2019 than at any point since the first half of 2009.
The declines have been led by London, where prices have fallen after years of rapid inflation. The average price of London homes sold by Savills fell by 32%, to £2.1m, in the first half of 2019 compared with the previous year, as the company shifted towards less expensive homes to make up for a weakness in “prime properties” – those worth more than £1.5m. Volumes of more expensive prime homes in central London fell by 13%. Outside the capital average prices edged up.
A monthly survey from the Royal Institution of Chartered Surveyors released overnight showed UK house prices dropped by more than expected in July, with consumers becoming increasingly cautious as Brexit looms.
Home repossession claims at 4-year high
Mortgage lenders’ claims for home repossessions in England and Wales have hit their highest level in more than four years, official figures show.
Britain’s Ministry of Justice recorded 6,179 claims in county courts for repossessions in the three months to June, up 39% compared with a year earlier and the biggest annual increase since the financial crisis in 2008/2009.
Tim Waterlow, development director of mortgage provider Responsible Lending, says:
Financial stress in British households is rearing its ugly head in these figures. The number of repossessions may be small in relative terms but this is a keenly watched indicator of economic health for the country.
Things aren’t nearly as bad as they were around the time of the financial crisis in 2009 when repossessions peaked but such a large jump, topping the year-on-year rise seen in the final quarter of last year, raises fears serious financial strain among households is on an upward trajectory once again.
Repossessions are still below the levels seen during the global financial crisis and during the early 1990s recession, when they exceeded 25,000 a quarter.
Households have benefited from wages rising at the fastest pace in a decade and unemployment at its lowest rate the 1970s. However, the household savings rate – a measure of how much households save out of their disposable income – is close to a record low and the number of people falling into financial distress has increased over the past 18 months.
Craig Erlam, senior market analyst UK and EMEA at trading platform Oanda, has sent us his thoughts.
It’s been a wild ride in the markets so far this week and there’s little reason to expect anything different today, with Europe currently higher and US futures in the green.
It’s safe to say investors are struggling to make up their mind at the moment. On the one hand, the trade war is a significant downside risk to the global outlook but on the other, central banks are cutting rates around the world in a bid to halt the slowdown before it takes hold.
I guess the fact that we haven’t had an escalation in the last couple of days is also helping, given how quickly everything escalated in the immediate aftermath of the talks in Shanghai. Markets clearly aren’t stabilising but the sell-off has stalled, for now, which will come as a relief.
Morning summary
European shares are trading higher, cheered by strong Chinese exports and the absence of any further escalation in the US-China trade war. It is the second day of gains, restoring some calm to markets after several days of heavy selling and a sharp fall in the yuan beyond the seven-to-one-dollar level, which prompted Washington to brand Beijing a currency manipulator on Monday. Asian stocks also recovered overnight.
- UK’s FTSE 100 up 22 points, or 0.31%, at 7,220
- Germany’s Dax up 0.76% at 11,738
- France’s CAC 40 up 1.23% at 5,331
- Italy’s MiB up 0.77 at 20,698
- Spain’s Ibex up 0.88% at 8,823
The spot price of gold broke through $1,500 an ounce for the first time since April 2013 yesterday, as investors sought safer assets amid the trade tensions. Gold is now trading at $1,496 an ounce, down 0.3% on the day.
In India, gold prices hit a record high of Rs 37,920 per 10 gram in Delhi due to strong buying from jewellers.
The pound has firmed slightly against the dollar and the euro, to $1.2156 and €1.0847, after hitting two-year lows last week.
Ricardo Evangelista, senior analyst at broker ActivTrades, has looked at the moves in currency markets:
It was a turbulent start to the week, which saw the yuan break the 7 to $1 level, as well a sharp rise of traditional safe haven currencies, like the yen and the Swiss Franc, against other majors.
Today we are experiencing the proverbial calm after the storm, and all major currency crosses are nearly flat. It is worth mentioning that, despite the apparent tranquillity, the market sentiment still favours traditional refuge assets, as international trade tensions continue to cast long shadows over the growth prospects of the global economy and threatening a global recession.
Updated
Greek unemployment drops to 17.2%, lowest since 2011
There’s some good news out of Athens: the jobless rate dropped to 17.2% in May, from 17.4% (which was revised down) in April, according to official data. This was the lowest unemployment rate since May 2011. Youth unemployment also declined significantly.
The number of unemployed people was 815,166, with younger people aged up to 24 still the worst affected, according to seasonally adjusted data. However, among younger people aged 15 to 24, the jobless rate fell to 33.8% from 38.9%.
Analysts are cautious about the recovery in global shares.
Michael Hewson, chief market analyst at CMC Markets UK, says:
There remains little prospect of a swift resolution to the current impasse between the US and China, as the People’s Bank of China fixed the yuan above the 7.00 level for the first time since 2008.
This means that for this rebound to gain further momentum we would need to see evidence of a softening of the rhetoric around trade, and a willingness on the part of both parties to dial back their current positions.
The rebound in the equity markets is also being helped by a rebound in yields in bond markets after yields hit record lows in Germany and the UK yesterday, and three central banks, including the Reserve Bank of New Zealand and Reserve Bank of India slashed their benchmark lending rates.
Iris Pang, ING’s economist for Greater China, has delved into the Chinese trade data. She found some unusual export activity, which may have distorted the headline number.
Unusual items appeared to be very supportive to exports. China exported more coal (64% month-on-month), which could be due to a surplus in coal mining, as well as more fertiliser (42% month on month). It even exported more crude oil (56% MoM), which is very unusual because China’s crude exports had fallen 61.8% year-on-year in the year to date.
It is possible that these exports are going to the Belt and Road economies which, if true, could be the start of a new trend for China’s exports.
The more typical export items put in a fairly average performance. Handsets grew 9% month on month but were down 15.8% year-on-year in the year to date and auto-process computers fell 8.0% month on month. Combining the two, we don’t hold a very positive view of China’s exports because these two items usually comprise much of the growth.
Updated
The pound has risen slightly against the dollar today. It is trading at $1.2168, up 0.2%, and is flat versus the euro at €1.0843.
Hussein Sayed, chief market strategist at currency broker FXTM, has looked at interest rate cuts and the latest market moves.
After a 2% slide in US equities early Wednesday, the S&P 500 managed to erase all losses and end up 0.1% higher. Such market reversals have been very rare during the decade-long bull market.
As for the reasons for the recovery, there is no one precise reason. For some investors, the S&P’s 6.6% drop since July 29 may have looked exaggerated, hence an opportunity to buy bargain stocks. Others point to the steep fall in US Treasury yields which have fallen 22% on the 10-year bonds in just six days, making stocks a better alternative. However, one common factor that all investors seem to agree upon is the expectation of lower interest rates going forward.
Central banks across the globe are rushing to lower interest rates. Yesterday central banks in New Zealand, Thailand, and India all announced larger-than-expected interest rate cuts.
Sayed says:
This aggressive approach to monetary policy easing isn’t justified when looking at hard data; however, policymakers seem to be getting prepared for a worsening global economic outlook.
Bets on the Federal Reserve cutting rates by 50 basis points in September are also on the rise. Investors are currently pricing in a 21% chance of a 50 basis point cut in the next meeting. That’s up from 0% last week.
Updated
Analysts warned that the boost from the weaker yuan for Chinese exporters may not last, though, as new US 10% tariffs kick in on $300bn of Chinese goods on 1 September.
Julian Evans-Pritchard, senior China economist at Capital Economics, says:
Looking ahead, exports still look set to remain subdued in the coming quarters as any prop from a weaker renminbi [the Chinese currency’s official name] should be overshadowed by further US tariffs and broader external weakness.
#China Balance of #Trade at $45.05B https://t.co/g6BDTs6Lq8 pic.twitter.com/i0vLe1QJIt
— Trading Economics (@tEconomics) August 8, 2019
Despite the recovery in global shares, which comes after heavy selling earlier this week, gold – considered a safe-haven asset in times of turmoil – is still hovering near $1,500 an ounce. Spot gold is currently at $1,498 an ounce.
Gold rose through $1,500 an ounce yesterday afternoon for the first time since 2013, taking the metal’s gains this year to 17%.
Updated
Back to the Chinese trade data.
Lu Yu, a portfolio manager at Allianz Global Investors, said a weaker Chinese yuan against the US dollar and other currencies has helped Chinese manufacturers to sell their goods overseas – even though the US imposed a 25% tariff on $200bn of Chinese goods in May.
She told CNBC’s “Street Signs” that the depreciating yuan
is helping the exporters in China to export not just to the US because it dampens the impact of the tariff hike, but also help them to export to other countries.
Global stocks rose as investors take comfort in China trade data, Yuan fix. China fixed Yuan beyond 7/Dlr but not as weak as feared. Oil rebounds on expectations producers may cut supply. Recession talks fuels rush to bonds w/US 10y yld at 1.72%. Gold breaks $1.5k, Bitcoin $11.9k pic.twitter.com/3Aq8XwnRsr
— Holger Zschaepitz (@Schuldensuehner) August 8, 2019
Savills: UK resi deals lowest since financial crisis
Savills, the property group and upmarket estate agent, said it had been hit by Brexit uncertainty and the US-China trade war, as it posted a 7% drop in pre-tax profits to £24.7m for the six months to June.
The firm said residential transactions in the UK were at their lowest level since the global financial crisis in 2008. In London, the average value of residential property sold by Savills fell 32% to £2.1m, from £3.2m in the same period last year.
Savills added:
In Asia Pacific, the imposition of Sino/US trade tariffs has affected investment confidence, particularly in Hong Kong, where office investment volumes declined by 34% during the period.
Updated
European shares rise at the open
And we’re off.
- FTSE 100 index up 0.5% at 7,234
- Germany’s Dax up 0.9%
- France’s CAC 40 up 1.3%
- Italy’s FTSE MiB up 0.96%
- Spain’s Ibex up 0.8%
- Portugal’s PSI 20 up 1%
Updated
Introduction: Strong Chinese exports cheer markets
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
China has released trade figures that show a surprise 3.3% rise in exports in July, despite the escalating trade war with the US. The sharp drop in the yuan this week, beyond the key 7 per dollar mark for the first time since spring 2008, should help exporters although they are now facing fresh US tariffs from September along with weaker global demand.
Exports rose 3.3% in July from a year earlier, the biggest rise since March, customs data showed. Analysts had expected a 2% decline after June’s 1.3% fall. Imports declined by 5.6%, indicating weak domestic demand, although the fall was smaller than the forecast 8.3% and June’s 7.3% drop.
David Madden, market analyst at CMC Markets UK, says:
The softer yuan is helping exports, but the drop in imports highlights the falling domestic demand.
China recorded a trade surplus of $45.06bn last month, down from $50.98bn in June. The country’s trade surplus with the US shrank to $27.97bn in July from June’s $29.2bn. However, it reached $168.5bn in the first seven months of this year, highlighting the imbalances between the two countries that have angered Donald Trump.
Washington raised tariffs on Chinese goods in May after negotiations broke down whereupon Beijing retaliated. A truce was reached in July in the year-long trade war but was shattered last Friday when Trump vowed to slap a 10% tariff on $300bn of Chinese imports from 1 September.
European shares rebounded yesterday and are expected to continue their recovery today, taking their cue from Asia, where a stronger yuan has calmed nerves. The People’s Bank of China fixed the yuan at a firmer-than-expected rate overnight, to limit its decline, albeit above the seven-to-one-dollar level.
- Japan’s Nikkei up 0.4% at 20,598.11
- Taiwan’s TSEC 50 up 1.04% at 10,494.49
- Hong Kong’s Hang Seng up 0.71% at 26,174.74
- Shanghai Composite up 0.96% at 2,795.21
- Australia ASX up 0.82% at 6,642.30
US stocks suffered declines yesterday as some traders piled into the safety of US government bonds, driving bond yields lower. However, they largely recovered by the end of the day and the S&P 500 closed marginally higher, up 0.08% at 2,883.98 while the Dow Jones was slightly lower, down 0.09% at 26,007.07.
Updated
