Mixed day for European markets as recovery fades
With enthusiasm draining away as the close of trading approached, European markets failed to hold on to the bulk of their early gains, limited as these were anyway. The fears about a trade war after Donald Trump raised the stakes in his attacks on China and elsewhere continued to dominate sentiment.
A rise in the oil price gave a lift to the FTSE 100 but elsewhere markets slipped back by the close, in some cases into negative territory. An early rise on Wall Street did little to support shares elsewhere. So the final scores in Europe showed:
- The FTSE 100 finished up 28.08 points or 0.37% at 7537.92
- Germany’s Dax dipped 0.29% to 12,234.34
- France’s Cac closed down 0.05% at 5281.29
- Italy’s FTSE MIB edged up 0.3% to 21,419.27
- Spain’s Ibex ended up 0.2% at 9637.4
On Wall Street, the Dow Jones Industrial Average is currently up 80 points or 0.34%.
Here’s our story on the latest on the spat between Donald Trump and Harley-Davidson over trade tariffs:
And here’s the criticism of the Bank of England over its expenses:
On that note, it’s time to close for the day. Thanks for your comments, and we’ll be back tomorrow.
A London magistrates court says Uber can continue operating in London, but for a trial period:
A court decided the ride-hailing firm should be awarded a new, 15-month probationary licence, after being told of sweeping changes to its practices.
The ride-hailing firm’s future in one of its biggest global markets had been in jeopardy after Transport for London ruled last September that it was not “fit and proper” to hold a private hire vehicles operator’s licence.
At the start of a two-day hearing, Uber admitted that London’s original decision not to renew its five-year licence had been correct. TfL cited concerns about public safety and security, including reporting of crimes, and background checks on drivers.
But Uber’s lawyers convinced Westminster magistrates court that it had since cleaned up its act, while continuing to operate in the capital pending its appeal.
Chief magistrate, Emma Arbuthnot, said that Uber should pay all costs of the appeal. TfL’s lawyer said a figure of £425,000 had been agreed.
Our full report is here:
The nervous gain made by markets in the wake of Monday’s falls is hardly a convincing recovery. Joshua Mahony, market analyst at IG, said:
There is little reason to believe that this respite from the recent selling in the larger markets is anything more than a breather before the pressure starts once more.
No one is showing any signs of backing down in the escalating and dangerous trade war that was started by the US. Today, the focus of US President Donald Trump’s ire is iconic motor cycle manufacturer Harley Davidson, which is threatening to get round the EU’s retaliatory import tariffs by increasing production outside the US. Trump is warning the company of a big tax being levied should it move production to Thailand, and we are seeing an important proxy play out for future cases given the growing impact this trade war is having on US-based firms.
US consumer confidence has taken a knock this month, with today’s Conference Board survey highlighting a particularly noticeable decline in future expectations. While many believe that the US will emerge in an improved economic standing in the aftermath of this current trade war, the fact is that we have a huge degree of anxiety over how this will play out. With China eradicating tariffs on Soybeans (one of the biggest US exports to China) from five Asian countries, it is clear that China is positioning itself for a further breakdown in US-China trade relations.
There may not be a full blown trade war but markets will continue to be hit by the continuing tensions, says Ingvild Borgen Gjerde at Capital Economics:
Despite the small rebound in equity markets today, fears of a global trade war have increased further this week. This, together with a likely slowdown in the US economy next year, will probably continue to weigh on equities.
The news over the weekend that the US is taking further steps towards implementing protectionist policies, and that it is broadening its approach, strengthen the perception that we are genuinely moving closer to a full-blown trade war. This, rather than the proposed measures themselves, explains yesterday’s sell-off in equity markets.
Information technology (IT) stocks were hit particularly hard yesterday, which is not surprising. Admittedly, the measures are meant to protect US technology. But they could hurt the sales of US IT firms in China, or limit their ability to operate there.
However, some of the stocks that fell the most in the US were consumer discretionary stocks, with very limited exposure to China. And some of the IT firms with larger-than-average exposure to China fared better than those with less exposure.
Indeed, the stocks of the so-called FAANGs, the group of large US consumer discretionary and IT firms, were among the hardest hit stocks in the US yesterday. (See Chart.) This follows surprisingly strong performance so far this year, and suggestions that the FAANGs are emerging as some form of safe haven amid rising global trade tensions.
....We disagree with this notion. While most of the FAANGs might not be very exposed to China, they are still highly cyclical. They are therefore particularly vulnerable, as a trade war would raise the risk of an economic slowdown.
We still do not anticipate a full-blown trade war, and we do not expect the protectionist measures implemented or proposed thus far to kill the current economic expansion on their own....However, as equity markets usually lead the economy rather than the other way around, the current escalation of trade tensions is adding to the pressure on global equity markets. What’s more, cyclical sectors remain particularly vulnerable in this environment, with or without exposure to China.
Markets are managing to hold on to their - fairly limited - gains. Connor Campbell, financial analyst at Spreadex, said:
The morning’s positivity managed to carry over into the US session, though the gains were nothing compared to Monday’s losses.
The Dow Jones managed to rise 0.3% after the bell, sending the beleaguered US index back above 24300. This despite another strong day for the dollar, with the greenback rising 0.4% against both the pound and the euro, sending the former below $1.323 and the latter towards $1.165, and jumping half a percent against the yen.
The most recent Conference Board consumer confidence reading had little impact on either currency or index, the possible negative impact of the worse than expected month-on-month decline countered by the upwards revised figure from May.
Commenting on the US data Lynn Franco, director of economic indicators at the Conference Board, said:
Consumer confidence declined in June after improving in May. Consumers’ assessment of present-day conditions was relatively unchanged, suggesting that the level of economic growth remains strong. While expectations remain high by historical standards, the modest curtailment in optimism suggests that consumers do not foresee the economy gaining much momentum in the months ahead.
US consumer confidence slips
It should hardly come as much of a surprise, given the amount of talk about the recent trade tensions, but US consumer confidence has slipped back in June, coming in below expectations.
The Conference Board consumer confidence index fell from 128.8 in May (itself revised up from 128) to 126.4. Analyst had forecast a level of 128.
Here’s our latest report on the new spat between Donald Trump and Harley-Davidson:
President Donald Trump on Tuesday threatened Harley-Davidson with a “big tax” and said the motorbike company’s decision to shift some motorcycle production overseas, “will be the beginning of the end”.
A day after the company announced it was moving some production overseas to mitigate the impact of Trump’s tariffs on European steel and aluminium Trump used Twitter to say the company is using “Tariffs/Trade War as an excuse” to hide previously announced plans to move jobs to Asia.
The Milwaukee-based company said on Monday it came to its decision because of retaliatory tariffs it faces in an escalating trade dispute between the US and the European Union.
Trump warned Harley-Davidson that any shift in production “will be the beginning of the end”.
“The Aura will be gone and they will be taxed like never before!” Trump said in one of several tweets on Tuesday. He was referring to tariffs Harley-Davidson would face on motorcycles produced overseas and shipped back to the US for sale.
The president has held up the motorcycle maker as an example of a US business harmed by trade barriers in other countries, but Harley-Davidson had warned that new US tariffs could negatively affect its sales.
Trump recently imposed steep tariffs on aluminium and steel imported from Canada, Mexico and Europe in his attempt to reduce trade deficits between the US and its trade partners. But those countries have treated Trump’s action as an insult and have chosen to respond in kind. The US and China are also volleying back and forth over tariffs.
The full story is here:
Wall Street edges higher
After Monday’s slump, US markets have indeed managed to open in positive territory, even if the gains are not particularly convincing.
The Dow Jones Industrial Average is currently up 47 points or 0.2% while the S&P 500 opened 0.19% higher and the Nasdaq Composite added 0.29%.
Technology stocks, which on Monday were among the biggest fallers after Donald Trump latest trade threats hit the sector, are leading the recovery.
Gold is typically seen as a haven for investors in times of market turmoil, but not at the moment. It has been heading lower for a while and is down another $8 an ounce to $1257 so far today. Fawad Razaqzada, market analyst at Forex.com, said:
Gold has been falling sharply of late, dropping by a good $50 in the space of nine trading days. At the time of writing, the yellow precious metal was trading around $1257, its lowest level since December 18. The perceived safe haven metal has been unable to find much demand from flows out of the equity markets which have been tumbling amid concerns over global trade disputes and the outlook for rising interest rates.
Indeed, the trend of central banks turning hawkish has continued in recent weeks. The Fed has indicated that it will probably raise borrowing costs two more times this year, while the ECB’s QE will end at the end of this year – albeit the first rate rise has been delayed – and there are now more hawks at the BOE (3) than expected (2).
As central banks tighten monetary conditions, yields could rise further. This means the opportunity cost of holding noninterest-bearing assets like gold will increase (on a relative basis) along with expectations for higher borrowing costs. Unfortunately for gold, which is priced in the dollar, interest rate expectations in the US have been rising faster than in other regions. This has helped to underpin the dollar and undermine foreign currencies, and pressurised buck-denominated gold further.
Thus, for gold to make a meaningful comeback, the dollar will have to depreciate and depreciate sharply. This can only happen if incoming US macro data were to deteriorate sharply, or the global economy – in particular, the EU – starts to expand at a faster pace than the US economy. However, as things stand, this looks unlikely and we therefore may see further dollar strength in the coming days and weeks. So, the outlook for gold looks bleak.
A few minutes until Wall Street opens and the futures market is predicting the US markets - like those in Europe - will stage a minor recovery. After Monday’s 328 point decline, the Dow Jones Industrial Average is forecast to open up around 40 points.
Trump roasts Harley-Davidson over tariff move
Getting back to the trade wars.... Donald Trump has savaged Harley-Davidson for deciding to move some production out of America to avoid EU tariffs on US goods.
The president accused the motorbike manufacturer of misleading customers yesterday, by using tariffs as an ‘excuse’ to shift jobs.
He says it will be the ‘beginning of the end’ for Harley, unless it scraps the plan.
Early this year Harley-Davidson said they would move much of their plant operations in Kansas City to Thailand. That was long before Tariffs were announced. Hence, they were just using Tariffs/Trade War as an excuse. Shows how unbalanced & unfair trade is, but we will fix it.....
— Donald J. Trump (@realDonaldTrump) June 26, 2018
....We are getting other countries to reduce and eliminate tariffs and trade barriers that have been unfairly used for years against our farmers, workers and companies. We are opening up closed markets and expanding our footprint. They must play fair or they will pay tariffs!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
....When I had Harley-Davidson officials over to the White House, I chided them about tariffs in other countries, like India, being too high. Companies are now coming back to America. Harley must know that they won’t be able to sell back into U.S. without paying a big tax!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end - they surrendered, they quit! The Aura will be gone and they will be taxed like never before!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
Overnight, the Financial Times spoke to Harley workers in Milwaukee. Most apparently still support Trump, and think he’s using his business smarts.
Here’s a flavour:
“He wouldn’t do it unless it needed to be done, he’s a very smart businessman,” said one Harley employee whose name is embroidered on his work shirt — though he asks not to be quoted by name.
“I think he’s playing poker: I’ll hit you with this, you’ll hit us with that, I think this will bring them to the table — unless he’s completely crazy,” chimed in another....
Before being quizzed over those whopping travel expenses, Bradley Fried told the Treasury committee that the Bank of England was committed to improving diversity.
Reuters has the details:
The Bank of England’s next governor must embody values of inclusion and accountability, as well strong economic skills, the new chair of the central bank’s court of directors said on Tuesday.
“Those values include inclusion, they include accountability, they include collaboration, decisiveness and empowerment. We would want that in the new governor,” Bradley Fried told lawmakers.
Incumbent governor Mark Carney is due to step down on June 30, 2019, and finance minister Philip Hammond is expected to announce his successor before the end of this year.
Fried also acknowledged the criticism for only having one woman (Silvana Tenreyro) on the Bank’s nine-strong Monetary Policy Committee which sets interest rates. That image doesn’t match the Bank’s commitment to inclusivity and equality, Fried insisted.
There’s also only one woman (Elizabeth Stheeman) on the Financial Policy Committee alongside 12(!) men - including two facing tough questions about their trans-Atlantic flights....
Bank of England challenged over 'gobsmacking' expenses
Back in parliament, the new chair of the court of the Bank of England has faced some uncomfortable questions about expenses.
Bradley Fried has been asked to justify how two members of the BoE’s Financial Policy Committee, Donald Kohn and Anil Kashyap, ran up £390,000 of travel expenses in the last two and a half years.
This is “a simply staggering sum”, says Conservative MP Simon Clarke. Is it really a sensible use of the bank’s resources?
Fried argues that Kohn and Kashyap’s expertise mean it was value for money, given the skills which they provide to the FPC.
“In the context of the skills we needed on the committees at the time…
Having seen these committees in action and the contributions they have made, as high as their expenses have been, so staggering, I think, has been their contribution”.
Anil Kashyap is a professor at the University of Chicago, while Donald Kohn is a senior fellow at the Brookings Institution in Washington. Both men are travelling between London and America to attend FPC meetings - with the Bank picking up the tab.
Clarke says his constituents would be “gobsmacked” to hear that one return flight from Chicago for Mr Kashyap to attend a meeting in February cost £11,084.89.
Clarke says:
“These meetings must be scheduled months in advance. I cannot understand how that figure was arrived at.
Are FPC members allowed to fly first class, he wonders.
Our people fly business class, replies Fried, but he’ll check this issue.
Onto taxis!
Donald Kohn, it transpires, took a flight from Washington to London costing £8,000 and added an extra £469 in taxi fares.
Clarke says this is “just unconscionable”.
He adds that there are “disturbing echoes” of the culture that was exposed by the House of Commons expense scandal in 2009.
As if this wasn’t enough, Clarke reminds Fried that the Bank’s 2016 summer party cost £100,000. That’s “one hell of a party”.
Is that public money? if it isn’t, whose money is it?
Fried says he will “reflect” on this issue and “figure out with our financial manager what framework is appropriate.”
Clarke puts his finger on another dubious issue. The Bank of England’s Sports Centre facility at Roehampton - where it costs £1,464 per year to a humble member of the public, but Bank staff only pay £50 a year.
That, Clarke says, is “an extraordinary good deal, and suggests an extraordinary subsidy being offered here”. How does that fit with the Bank’s mandate of promoting monetary and financial stability?
Fried admits that the issue will be examined:
Roehampton is part of what we look at. We will be looking at Roehampton.
Andy Bruce of Reuters has dug out an example of Donald Kohn’s expenses - including more than £56,000 in one three-month period last year.
Big questions to be had over the enormous expenses of Bank of England FPC member Don Kohn, says @SimonClarkeMP at @CommonsTreasury pic.twitter.com/iGbwNBtIe7
— Andy Bruce (@BruceReuters) June 26, 2018
Updated
Chinese stocks fall into bear market: What the experts say
The Chinese stock market’s slide into a bear market today has sent shivers through the financial world, particularly in Asia.
With shares down 20% since January, and worries about trade rising, investors fear more losses ahead.
Qian Qimin, strategiest at Shenwan Hongyuan Group in Shanghai, says the threat of trade protectionism could push shares lower.
“The market may keep falling since it’s still hard to gauge the impact of trade tensions.
Investors will keep cutting risk.”
Analysts at Danske Bank have warned that some international companies could pull out of China, leading to an outflow of capital.
“We envisage that US companies in China will increasingly repatriate profits as they risk being caught in the crossfire in the trade war.
The prospect that America blocks some technology exports to China (and maybe other countries too?) is also alarming traders.
Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities in Tokyo, explains why such a move would be significant:
“Unlike the seemingly spur-of-the-moment tweets by President Trump and the retaliatory exchange of tariffs, Washington’s bid to protect intellectual property is an issue at the heart of a trade row between two powers battling for future global supremacy.”
“It’s turning out to be a long-term bearish factor for the financial markets, as the United States is unlikely to back down at least through its midterm elections.”
Jonathan Haskel seems to be talking sterling down, even before he gets his knees under the table at the Bank of England.
Sterling has dropped by half a cent today, to $1.322, as Haskel tells MPs that there may be more slack in the UK economy than we think. If he’s right, that could mean interest rates rise more slowly.
Haskel is generally coming over as a more dovish policymaker, which is significant as he’s replacing the hawkish Ian McCafferty...
Incoming member BoE Haskel leaning on the dovish side.... reminder, he will be replacing one of the most hawkish members McCafferty $GBP
— Justin McQueen (@JMcQueenFX) June 26, 2018
The man who will be replaced by Jonathan Haskel is also speaking this morning, explaining why he voted (in vain) to raise UK interest rates last week.
Ian McCafferty, who leaves the Bank of England monetary policy committee this summer, is arguing the economy is much stronger than official figures suggest.
In his final major speech, McCafferty declares:
“We should not dally in making the next move.
In his view, low unemployment is starting to drive wages higher and energy prices are rising - both of which could keep inflation above the Bank’s 2% target.
“Continuing with the slow reduction in monetary stimulus without undue delay could well prevent the need for a more aggressive tightening later on.
Bank of England's policymaker on trade war damage
Over in parliament, economics professor Jonathan Haskel is being quizzed by MPs about his appointment to the Bank of England’s monetary policy committee.
Haskel has warned that rising protectionism could threaten the UK economy by driving up costs and hurting economic demand.
Haskel told the Treasury committee:
If protectionism were to break out into a widespread trade war I would of course be very concerned, for in such a situation economies would have higher inflation (due to higher import costs), lower demand (due to confidence etc.) and likely lower supply (to the extent that supply chains were interrupted that couldn’t otherwise be established).
And we're off with Professor Jonathan Haskel on his appointment to the MPC. pic.twitter.com/fXF17aFzgc
— Treasury Committee (@CommonsTreasury) June 26, 2018
Haskel also warns that Brexit’s effect on the UK economy is still very uncertain.
On productivity (his specialist area), Haskel says he’s less pessimistic than some other experts. He believes that some firms are making significant investment in artificial intelligence which aren’t yet bearing fruit.
Haskel is due to join the BoE’s monetary policy committee in September, and he’s now being grilled about gender balance, following the row over his appointment (over four female candidates).
He says that Imperial College, where he works, are making efforts to improve the pipeline of female candidates into economics. This includes outreach programmes and efforts to engage with schools (Imperial experts who will turn up and perform a “whole load of explosions”).
Wes Streeting MP jokes that the Treasury Committee might enjoy a demonstration; Haskel gently points out that the House of Commons has already had one near-miss with explosions....
Updated
Hammond: Trade war would be disaster for America
Newsflash: Britain’s finance minister has warned that a trade war would be disastrous, not least for the United States.
Speaking during a visit to India, chancellor Philip Hammond has told CNBC that we are living in “uncertain times” right now, thanks to Donald Trump’s approach to trade and tariffs.
He told CNBC India:
The old certainty for many decades has been that the United States was completely wedded to open markets and free trade.
And now the United States is questioning the value, the fairness, of some of our arrangements.
Hammond warns that a full-blown trade was could be devastating.
“I very much hope that we can avoid a full scale trade war (because) that would be a disaster for everyone, not least for the United States.
Hammond also pledge that the UK would remain “an outspoken proponent of open markets and free trade, low tariffs barriers and low non-tariff barriers”.
The chancellor is one of the key voices pushing for a relatively ‘soft Brexit’, under which Britain’s existing trade links with Europe are largely maintained.
Updated
This chart shows how China’s Shanghai composite index has fallen pretty steadily since its recent peak at the end of January.
The slump in Chinese shares this year will worry policymakers in Beijing.
Many small investors will have suffered hefty losses as the Chinese market has slid 20% from January’s high. Financial speculation could destabilise the economy, at a time when officials are trying to tackle financial risks and shadow banking problems without hurting growth.
Peter Garnry of Saxo Bank says China is under pressure to settle the trade dispute with America:
CSI 300 futures are in a bear market putting extra pressure on the Chinese government to find a solution on trade with the US. As we said last week, the US has the upper hand. Underweight all trade surplus countries: Canada, Mexico, Germany, China, Japan and South Korea #TradeWar
— Peter Garnry, CFA (@petergarnry) June 26, 2018
After yesterday’s tumbles, European traders will have approached their desks nervously today.
But so far, the City looks relatively calm. The FTSE 100 has rise by 23 points in early trading, having plunged by 173 points yesterday.
The news that China has fallen into a bear market hasn’t caused a wider panic.
The French and German markets have also risen by around 0.3%, as investors try to digest some mixed messages from the White House overnight.
Wall Street was spooked last night by treasury secretary Stephen Mnuchin’s claim that America could restrict investment from “all countries that are trying to steal our technology.”
That message was then undermined by trade advisor Peter Navarro, who went on TV to declare:
“There’s no plans to impose investment restrictions on any countries that are interfering in any way with our country. This is not the plan.”
So we’ll have to wait and see what Donald Trump signs off later this week.
In the meantime, these escalating tensions are making investors increasingly nervous, says Naeem Aslam of Think Markets.
If the US stops Chinese investment in certain US sectors, it will have a strong counteraction. Treasury secretary, Steven Mnuchin has said that more details on this would follow by the end of this week and this is going to keep investors even more nervous.
On top of this, Trump administration is further adding to this uncertainty by keep sending conflicting statements; one person would say it is fake news and another would say more details on the topic would emerge sooner than later.
Dickie Wong, head of research at Hong Kong-based broker Kingston Securities, says the gloom is deepening in China, as America threatens to escalate the trade dispute.
Wong says (via CNN):
It’s a combo effect of concerns about the trade war and China’s GDP growth.
Last week Donald Trump threatened to impose tariffs on $200bn of Chinese imports, on top of the $50bn already being targeted.
China enters bear market
Newsflash: China’s stock market has fallen into bear market territory, as fears of a trade war with America hits confidence.
The Shanghai Composite index has dropped 0.5% today, which means it has fallen more than 20% from its recent peak in January.
Energy stocks and banks led the selloff today, as traders worried that escalating trade tensions would hit Chinese economic growth and financial stability.
Reports that the US will soon block Chinese firms from investing in America, and restrict the export of cutting-edge technology to China, has sent a shiver through the trading floors.
Airline stocks also had a bad day, amid worries that the weakening yuan would drive up the cost of servicing debts issued in US dollars.
It's official! #China has entered a bear market. Shanghai composite down more than 20% from its January high. pic.twitter.com/MaVF0fUX9n
— jeroen blokland (@jsblokland) June 26, 2018
Bloomberg reports that anxiety in China is growing:
“Pessimism will keep growing as many companies are on the edge of margin calls and bond defaults,” said Sun Jianbo, China Vision Capital president in Beijing.
“The benchmark Shanghai Composite Index will fall at least 10 percent from the current level.”
China’s benchmark Shanghai Composite slid into bear market territory Tues, closing down more than 20% below its January high. Chinese stocks have come under pressure in recent weeks from concerns over the strength of the country's economic growth & an emerging trade war w/ the US
— Will Ripley (@willripleyCNN) June 26, 2018
Updated
Trade war fears are hitting currencies across the developing world today.
Jameel Ahmad, global head of currency strategy at FXTM, explains:
Concerns over the possibility of an upcoming trade war are expected to remain front and centre of investor focus once again today.
The Chinese Yuan, Malaysian Ringgit, Thai Baht, Indian Rupee and Indonesian Rupiah are once again trading lower against the Dollar, while the Japanese Yen is still outperforming as a result of investor reluctance to take on risk during an atmosphere of market uncertainty.
The agenda: Trade war tensions; MPC hearing
Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business.
The markets are edgy today after growing worries of a trade war sent shares sliding on both side of the Atlantic yesterday.
Yesterday’s selloff wiped 328 points, or 1.3%, off America’s Dow Jones industrial average while the Nasdaq shed 2%.
China’s yuan has slumped to a near six-month low, as the threat of a deepening dispute with America hit confidence. Analysts believe Washington will press the button in tough restrictions on Chinese investment in the coming days, which would further escalate tensions with Beijing.
US treasury secretary Steven Mnuchin denied last night that America was targeting China, saying that “all countries” which pilfer US technology could face restrictions.
On behalf of @realDonaldTrump, the stories on investment restrictions in Bloomberg & WSJ are false, fake news. The leaker either doesn’t exist or know the subject very well. Statement will be out not specific to China, but to all countries that are trying to steal our technology.
— Steven Mnuchin (@stevenmnuchin1) June 25, 2018
Mnuchin may have been trying to help, but he’s actually raised fears of a broader crackdown by the US.
As Mike van Dulken of Accendo Markets puts it:
This trade spat story looks to have good legs on it everyone. Buckle up.
In weak trading, the yuan has fallen to 6.5573 against the US dollar today, the lowest since last December.
#China Yuan in free fall as RRR cut by PBoC is a further sign of a shift to an easier stance to shield the econ from trade war. pic.twitter.com/TcB5yJzO8x
— Holger Zschaepitz (@Schuldensuehner) June 25, 2018
The news that US motorcycle manufacturer Harley-Davidson would move some production out of America, thanks to EU tariffs, also hit sentiment yesterday.
Analysts warned that it shows the perils of tit-for-tat trade barriers:
Having triggered the current flurry of tariffs, Donald Trump has tweeted that manufacturers should be patient:
Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag. I fought hard for them and ultimately they will not pay tariffs selling into the E.U., which has hurt us badly on trade, down $151 Billion. Taxes just a Harley excuse - be patient! #MAGA
— Donald J. Trump (@realDonaldTrump) June 25, 2018
But other US companies may follow Harley’s lead, to avoid Europe’s new 25% tariffs on some US goods.
Also coming up today
MPs will be kicking the tires of Britain’s newest central bank policy maker, Jonathan Haskel, who joins the Bank of England in September.
Haskel is a productivity expert, but the City don’t know much about his views on monetary policy. The hearing may provide some hints on whether he’s a hawk or a dove, and thus likely to vote for interest rate hikes.
Haskel’s appointment caused a stir last month; he was the only man on a five-person shortlist, so the Treasury missed the opportunity to tackle the Bank’s gender problems.
On the data side, the CBI is publishing its estimate of UK retail sales this month.
We’ve already had one piece of bad retail news - struggling Carpetright has just posted a whopping loss of £70.5m for the last year, as it presses on with its store closure plan.
Carpetright also warned that some suppliers are tightening credit terms, following ‘adverse publicity surrounding the Group’s restructuring’.
#Carpetright says trading in first 8 weeks of new financial year ``heavily impacted'' by disruption arising from restructuring activity, particularly stock shortages due to some suppliers withdrawing supply
— Paul Jarvis (@pajemiki) June 26, 2018
Plus, the latest survey of US consumer confidence is released later today. It hit a three-month high - will trade tensions have weakened it?
The agenda:
- 10am BST: Professor Jonathan Haskel’s appointment hearing for the Monetary Policy Committee at parliament
- 11am BST: CBI survey of UK retail sales in June
- 3pm BST: US consumer confidence for June
Updated
