Graeme Wearden 

Markets rally as White House plays down trade war fears — as it happened

All the day’s economic and financial news, as markets rally on hopes that trade dispute between US and China can be solved
  
  

A ship unloads shipping containers at the Port of Los Angeles in San Pedro, California.
A ship unloads shipping containers at the Port of Los Angeles in San Pedro, California. Photograph: Andrew Gombert/EPA

And finally.... the closing bell of Wall Street has just been rung, ending a positive day on the markets.

The Dow was up 1% at the close, up 242 point, meaning it has posted a three-day winning streak.

That follows a strong session on the other side of the Atlantic:

Commodity prices have also recovered some ground; soybeans are up 1.5% today while corn gained 2.3%.

That may show that the soothing words from US officials, such as Larry Kudlow, is working. Or we might be reading too much into it! Pinning a narrative on the market action is tempting, but not always accurate....

We’ll be back tomorrow to track whether the recovery continues, or stumbles. Goodnight! GW

Not so fast, markets! The Financial Times is reporting that China could launch a legal challenge to America’s proposed tariffs, at the World Trade Organisation.

The FT says:

Beijing signalled it was willing to escalate its fight with Donald Trump over his plan for anti-China tariffs on Thursday by launching a legal challenge against Washington’s newly proposed duties on more than 1,300 Chinese products.

The Chinese move to open a World Trade Organization case came despite efforts by White House officials to ease fears of a looming trade war and is likely to feed doubts over the ability of the world’s two largest economies to reach an amicable settlement.

Beijing said the US’s proposed tariffs, unveiled earlier this week, represented a “serious violation” of global trading rules because they discriminated against Chinese goods and violated the tariff limits Washington had made commitments to....

Investors don’t seem too alarmed, though; the Dow is up almost 1% still, with the S&P 500 0.6% higher in late trading.

Here’s a taste of the New York stock exchange today, as traders rode the market higher:

With 90 minutes trading to go, the Dow is up 0.7% - or 173 points - on Wall Street.

Updated

Larry Kudlow has certainly hit the ground running, since joining the White House as National Economic Council Director.

During his tour of media outlets, the former Reagan adviser even told Fox that US growth could hit the heady heights of 5%.

CNBC has the details:

Asked whether the economy could post 5 percent annual GDP as it recovers from the financial recession, Kudlow said “we could.”

“Will we get 5 percent forever? No. But there’s a catch up here,” Kudlow told Fox Business Network. “Any economist will show you the long-term trend line for GDP versus the actual now: We’re like several trillion dollars below where we should be based on the long-term trend lines. I want to get back to that full potential.”

Frankly, that seems awfully ambitious. And if the US economy did rattle along at such a heady pace, the Federal Reserve would surely raise interest rates promptly for fear of inflation surging. Time will tell....

Updated

The New York stock market is extending its gains.

The Dow Jones industrial average is up 1% today at 24,495, a gain of 231 points.

Quite a recovery from yesterday’s tariff-fuelled panic:

Today’s rally was the FTSE 100’s best day since the aftermath of the EU referendum, says Marketwatch:

U.K. stocks on Thursday logged the best one-session gain in nearly two years as investors grew hopeful that negotiations would lead the U.S. and China to de-escalate brewing trade tensions.

The FTSE 100 index rose 2.4% to 7,199.50, marking its best daily advance since June 29, 2016, a rally that occurred in the aftermath of the U.K.’s vote to leave the European Union, known as Brexit.

Here are the details of how the European markets surged to a three-week high tonight:

  • UK’s FTSE 100: up 165 points at 7,199.50, a gain of 2.35%
  • Germany’s DAX: up 347 points at 12,305, a gain of 29%
  • France’s CAC 40: up 134 points at 5,276.6, a gain of 2.6%
  • Italy’s FTSE MIB: up 526 points at 22,969, a gain of 2.35%

Fiona Cincotta of City Index says a relief rally swept the markets today:

Markets across the globe continued to bounce back as optimism increases that the US and China are willing to work towards avoiding an all-out trade war.

The FTSE was led 169 point higher by tech stocks and the heavyweight commodity sector; the miners gaining support from higher metal prices, on hopes that China, the world’s largest consumer of metals won’t be entering a trade war with the world’s largest economy.

FTSE surges back

Boom! European market stock have roared back today, as traders wager that trade war fears have been overblown.

In London the FTSE gained over 2%, boosting its value by some £42bn.

Jasper Lawler of London Capital Group says buyers came back with a vengeance on Thursday.

It was a complete one-eighty from Wednesday’s rout. The bounce-back attributed to White House economic advisor Larry Kudlow easing trade war fears has gained some traction. The DAX index hit a 2-week high while the FTSE 100 reached its highest in 3-weeks. In this volatile environment, there is still scope to blind-sided again by the next official comment or Tweet about US-China trade negotiations.

Markets, eh?

Shares in major US exporters are rallying today, as Larry Kudlow’s comments help to reassure investors.

The Dow is now up 200 points, or 0.8%.

In London, the FTSE 100 has gained 1.8%, or 120-odd points.

Just in: Larry Kudlow, the president’s chief economic advisor, has played down the risks of a trade war.

Speaking to reporters outside the White House, Kudlow argues that the spat with China could have a happy ending - if it forces Beijing to play fairly.

Wall Street opens higher

Ding Ding! Shares are rising on the New York stock market, on hopes that a trade war between the US and China can be avoided.

The Dow Jones industrial average has gained 165 points, or 0.7%, to 24428. That extends yesterday’s late rally.

The US president has found some time in his busy schedule to correct the Washington Post’s headlines:

Sports fans keen to watch the Winter Olympics helped to drive America’s trade deficit to a nine-year high.

The Bureau of Economic Analysis reports that service imports rose by $1.1bn in February, to $47.8bn. That includes a $1.0bn increase in charges for the use of intellectual property, which “reflects payments for the rights to broadcast the 2018 Winter Olympic Games”.

That payment was made by NBC, which splashed out up $963 million for the rights to air the Winter Olympics in PyeongChang, South Korea.

It’s not clear that the money was well-spent. Viewing figures were 7% lower than for Sochi in 2014, making the 2018 Winter Olympics the least-watched on record.

Updated

US trade gap hits nine-year high

Newsflash: America’s trade gap has widened to its highest level in almost a decade.

The difference between US imports and exports hit $57.6bn in February, the biggest gap since October 2008, up from $56.7bn in January.

Exports rose by 1.7% to $204.4bn, but imports also increased by 1.7% to $262.0bn.

That means Donald Trump hasn’t, yet, made any progress in reducing America’s trade deficit with the rest of the world. The trade gap with China did narrow -- possibly due to the impact of the lunar New Year? -- but the deficit with Mexico widened.

Reuters has more details:

The deficit has now risen for six straight months. The goods trade deficit was the highest since July 2008 and the surplus on services was the lowest since December 2012.

Part of the rise in the trade deficit in February reflected commodity price increases. The politically sensitive goods trade deficit with China fell 18.6% to $29.3 billion. The deficit with Mexico surged 46.6% in February.

The president may not be best pleased....

Updated

The number of new vans bought in the UK fell by 5.6% in March.

The SMMT has reported that UK new van registrations dropped to 59,764 last month, from 63,316 a year ago. That’s a smaller decline than for cars, but it could also be a sign of economic uncertainty - and that March’s bad weather curbed spending.

They add:

  • Uplift in demand for smaller vans (1.8%) and pickups (6.8%) fails to offset declines for medium (-2.0%) and heavier (-10.5%) models.
  • More than 94,000 new van registrations in Q1 – dropping -3.7% compared to the same period in 2017.

SMMT CEO Mike Hawes says:

“A decline in the important plate change month of March is a concern and we need the right economic conditions to restore market stability and encourage buyers to invest in new commercial vehicles. The new van market is a key barometer of business confidence and while uncertainty remains, a degree of fluctuation in demand is to be expected this year.

The SMMT’s rolling tally of van sales suggests demand has been cooling since the EU referendum:

Analysts at Royal Bank of Canada suspect that UK economy growth could have halved in the last quarter.

They’ve crunched through today’s service sector PMI report, as well as the manufacturing and construction reports earlier this week. The upshot - growth in the first three months of 2018 won’t match the 0.4% recorded in October-December 2017.

Sam Hill of RBC explains:

The UK IHS Markit / CIPS Composite PMI dropped to 52.5 in March, a full two points lower than the previous month, on account of a large drop in the service sector survey.

Whilst the manufacturing sector survey didn’t contain too much evidence of weather-related disruption to activity, widespread snow early in March did appear to account for a good deal of the weakness in the construction and service sectors. The result is that our PMI-based GDP indicator now suggests Q1 GDP growth will be just 0.2% q/q, rather than 0.3% q/q previously. Given the margin for error in the indicator, and the relatively brief period of weather-related disruption we maintain our forecast of 0.3% q/q for Q1 GDP for the time being.

Newsflash: Another sign that China and the US could avoid a trade war:

Dimon calls for US leadership to defend WTO and NATO

Jamie Dimon, the head of JP Morgan, has warned American politicians not to drive the world economy into a new protectionist era.

In his annual letter to shareholder, Dimon gives a clear signal to Donald Trump not to undermine international institutions including NATO and the World Trade Organisations.

Such groups, Dimon points out, underpin the world order and allows democratic principles such as free speech and equality to spread.

As he puts it:

Reversing the interconnectedness built by our post-World War II institutions is neither desirable nor feasible. As a nation, we cannot isolate ourselves any more than we can stem the ocean’s tide. The international system provides agreed-upon rules of the road – and mechanisms for enforcing them. It serves as the basis upon which we can insist on fairer trade practices from competitors and adequate burden-sharing from allies. It is the means by which we can continue to improve people’s lives and livelihoods.

The system, built at great sacrifice, continues to serve our interests. It should be preserved and defended – ideally under strong U.S. leadership.

[President Trump, of course, has criticised fellow NATO members for not spending enough on defence]

And on trade, Dimon writes that US does have some legitimate issues with China.

China has realized significant economic and employment gains since joining the WTO in 2001. China was expected to continue on an aggressive path of opening up its economy, but this has happened at a much slower pace than most nations expected.

Now, more than 16 years later, it has the second-largest economy in the world and is home to 20% of the Fortune 500 companies, yet it still considers itself a “developing” nation that should not be subject to the same WTO standards as the United States and other “developed” countries.

However, simply imposing new tariffs on its goods in a unilateral fashion is not the answer. Instead, Dimon proposes a five-point plan:

  • The United States should define very clearly, and in detail, what it wants from China.
  • The United States should lay out a distinct timeline – and determine what the reaction would be if it is not met.
  • The United States should listen closely to China about any legitimate complaints it may have.
  • This should be done in partnership with our largest allies, particularly Japan and Europe.
  • The United States should revisit the Trans-Pacific Partnership and fix the parts considered unfair. The TPP could be an excellent economic and strategic agreement between America and its allies, particularly Asia. This is not against China: The country could at some point be offered the opportunity to enter the TPP if it demonstrates a willingness to meet its standards, which would improve upon the rules-based global trading system under American leadership.

Updated

Markets rally as trade fears ease

Back in the markets, mining companies are helping to drive the London stock market higher.

Resource giants such as Glencore, Anglo American and Antifagasta are among the top risers on the FTSE 100.

Mining companies would all suffer from a global trade war, as slower growth would hit demand for coal, iron ore, copper, aluminium. So today’s rally suggests that the City is hopeful that a full-blown protectionist clash can be avoided.

Lena Komileva of (g+)economics says there have been encouraging noises from officials in China and the US, following the news yesterday that both sides could enforce tariffs on $50bn of imports.

It is encouraging that the Chinese side has offered antidote to the escalation of language coming from the new While House China hawks around Trump: The US Chinese ambassador said that “negotiation would still be our preference but it takes two to tango”. Clearly, the ground is set for an intensive round of talks stretching over the next half year, into the US midterm elections on 6 November, during which time markets will face continued headline risk, but trade wars is not the endgame on the radar.

But still..... investors should be prepared for significant market volatility this year, she adds:

This may not be a trade war, but China and the US are caught in a long term economic cold war for global market share in new technologies. Geopolitical risk, and the market fragmentation that comes with it, is not a transitory wave but a climate sea change.

UK service sector hit by Beast from the East

Breaking away from the car sales figures...we have evidence that the UK economy slowed in March as wintery weather gripped Britain.

Activity in the dominant UK service sector slowed last month, growing at its slowest rate since July 2016.

That’s according to data firm Markit, whose UK service sector PMI fell to just 51.7 last month from 54.5 in February (any reading over 50 shows growth).

Companies reported that bad weather disrupted business operations, and contributed to subdued consumer spending in March.

Britain suffered some of its worst weather in years last month; a bitter cold spell, heavy snow and dangerous ice caused transport disruption and forced thousands of schools to close.

Chris Williamson, chief business economist at IHS Markit, says March’s PMI surveys suggest the economy weakened:

“The UK economy iced up in March, suffering the weakest increase in business activity since the Brexit vote amid widespread disruptions caused by some of the heaviest snowfall in years. As a result, first quarter economic growth will likely have been adversely affected.

The PMI surveys collectively signal a quarterly GDP growth rate of just under 0.3%, down from 0.4% in the fourth quarter, albeit with the rate of growth sliding to just 0.15% in March alone.

Howard Archer of IHS Global Insight agrees:

With construction activity also being hit markedly, the March purchasing managers’ surveys overall fuel belief that the severe weather may well have caused GDP growth to dip to 0.3% quarter-on-quarter in the first quarter of 2018.

Alex Buttle, director of car buying comparison website Motorway.co.uk, says the auto industry is failing to persuade drivers to buy new, less-polluting, diesel cars:

“What a difference a year makes. Twelve months ago the car industry was celebrating record new car sales, today, it’s facing something of a crisis with no clear plans to reverse its fortunes.

“The car industry has tried but failed to promote the benefits of Euro 6 diesel cars without government support and sales figures are telling. Consumers aren’t buying the sales patter with new diesel proving a confusing area for potential buyers.

“Diesel car owners are choosing instead to keep their current vehicles running longer than commit right now to a big ticket purchase. And instead of moving towards cleaner, greener motoring, British roads will remain clogged up with older, more polluting cars until the tide meaningfully turns towards electric.

He’s also concerned by the modest rise in electric car sales:

While new diesel registration figures are weak, the more worrying statistic is slow growth in AFV sales.

“Although electric and hybrid sales are up in March, a 5.7% rise is nowhere near rapid enough to keep us on track for the 2040 electric-hybrid switch over.

The UK auto sector suffered a ‘triple whammy’ this year, says Ian Plummer, Manufacturing and Agency Director at Auto Trader.

First, Q1 of 2017 was always going to be a hard act to follow because sales were artificially inflated by consumers pulling forward purchases ahead of changes to Vehicle Excise Duty.

Second, we had several days of Arctic weather and this impacted deliveries to dealers and deterred consumers from visiting showrooms.

And third, the ongoing negative impact of Brexit. Not only has it severely dented consumer confidence but falling exchange rates has reduced the scope for manufacturers to entice consumers with strong offers due to the impact of a falling pound on the profitability of cars sold in the UK.

Factor in the diesel crisis, and there’s plenty of reasons for people to put off buying a new car.

Updated

Britain’s car industry has now suffered its longest drop in sales in over six years.

The last time it fell for so many consecutive months was between July 2010 and July 2011 (13 months).

Ian Gilmartin, head of retail & wholesale at Barclays Corporate Banking, is also worried by the drop in car sales:

“There’s no disguising the fact that it’s another disappointing month for the new car sector. Achieving strong sales when new plate models hit the road is central to most sellers overall strategy, so there will be some concern at the continued slump revealed in these figures.

However, the comparison with last March is a little misleading, as the record result posted then was in part due to sales being brought forward ahead of tax changes that came into place in April 2017. Some of the fall can also be attributed to a prolonged natural correction following a bumper couple of years, which we always knew was going to be unsustainable in the long run.

The 15.7% slump in UK car registrations last month is a disappointment, says Chris Bosworth, Director of Strategy at Close Brothers Motor Finance:

Traditionally March is a popular month to buy vehicles as the new number plates are out, and this month’s figures should have been boosted by a spike in demand before the new VED changes set in. That said, petrol and alternative fuels remain the heroes of the forecourts, with diesel suffering and seeing yet another month of decline.

Bosworth also predicts turbulence in the car sector as Britain exits the European Union:

Dealers need to be willing and able to offer the most appropriate finance and stock to their customers, whether that’s diesel, petrol, or electric. The strong pound should ease the way and allow them to buy better value stock, while also offering breathing space for the losses incurred by cars sat on the forecourt.

Confirmation that drivers are shunning diesel cars, in the light of the Volkswagen emissions scandal:

UK car sale slump confirmed

NEWSFLASH: UK car sales slumped by 15.7% last month, according to new industry data which confirms that car buyers are shunning diesel cars.

That means that, as feared, car registrations have now declined for 12 months in a row. Sales so far this year are down 12.4% compared to the first three months of 2017.

The Society of Motor Manufacturers and Traders say:

  • As predicted, the UK new car market fell in March, down -15.7%, but still the fourth biggest March ever for the sector.
  • Fall in diesel demand continues, down -37.2% compared to same month last year, with AFVs up 5.7% and petrol holding steady at 0.5%.

The slump was broad-based; sales to business fell by 14.3%, while sales to private buyers shrank by 16.5%.

The SMMT blame Brexit uncertainty, and the move towards banning diesel cars from some UK cities to combat air pollution.

Economic and political uncertainty and confusion over air quality plans continued to affect confidence, resulting in declines across all sales types.

As this chart shows, March 2017 was a bumper month -- making last month’s decline all the sharper:

Updated

European stock markets have hit a two-week high in early trading.

Shares have rallied in London, Frankfurt, Paris, Madrid and Milan, on hopes that America and China will step back from launching a damaging trade war.

What a difference a day makes -- yesterday, shares were sliding after China announced 25% tariffs on key US exports like soybeans, cars and aeroplanes

Konstantinos Anthis, Head of Research at ADS Securities, explains:

Risk appetite turns positive as US and China seem willing to negotiate a way out of their trade spat helping equities move the upside and pushing the yen and Gold further lower.

China did announce a new round of tariffs worth $50 billion but said that they will only come into effect when the US implement their own measures. This suggests that China’s decision is yet another move on the negotiating table which explains why risk sentiment didn’t decline.

March 2017 was a record-breaking month for the UK car industry. Sales jumped by 8% as drivers rushed to buy new vehicles before changes to vehicle excise duty pushed up the cost.

So it’s not surprising that sales fell last month.

However.... a double-digit slump would be a serious reversal, and it would also mean sales have declined steadily for year. That’s more than a blip.

Tony Burke, assistant general secretary of the Unite Union, tweets:

Car industry: Weak confidence is hitting sales

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, has confirmed that March’s UK car sales figures (due in 50 minutes) were “undoubtedly grim”.

Hawes also warned that Brexit uncertainty continues to cast a shadow over the sector.

He told BBC Radio 4’s Today programme:

“All the indicators are that consumer and business confidence has declined, especially for the big ticket items. A car is the second biggest thing you’re likely to buy.

“The industry is facing this uncertainty since the referendum. We’re an industry that operates on wafer thin margins so anything that’s going to affect the competitiveness of each of those plants is going to put a lot of pressure on. Now models, allocations tent to happen every four, maybe five years, so we can see ahead to when some of those decision points are. What we need is as much certainty in an uncertain world and trying to retain as many of the benefits as we currently have with our relationship with Europe, because it is by far our biggest market and it’s right on our doorstep.

“The transitional deal has given us a bit of certainty for an additional 21 months and it gives us the time to be able to negotiate what that future relationship is going to look like. For us we’ve been very clear, we need to make sure there’s no tariffs, ideally staying within the customs union and indeed the single market. That’s what’s made us so competitive and enabled us to grow since the recession. We don’t want to see that go backwards.”

Updated

The agenda: Car sales slide again

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britain’s car industry has suffered another slump in car sales, as economic uncertainty and the diesel emissions scandal continues to bite.

Figures released at 9am today are expected to show that new registrations shrank by around 15% last month, compared to March 2017.

That would mean the industry has racked up 12 months of falling sales in a row,

As Reuters explains:

After record-high sales in 2015 and 2016, full-year demand dropped in 2017 due to uncertainty about future environmental levies on diesel cars and weaker consumer spending after June 2016’s Brexit vote, which pushed up prices.

Demand was also artificially inflated in March last year, when customers brought forward purchases to beat a tax rise which came into force in April 2017.

Britain’s automobile industry is already concerned that it could suffer badly if new trade barriers are introduced after Brexit; sliding domestic sales will only add to its anxiety.

Also coming up today

After yesterday’s turmoil, the financial markets are calmer as the White House tries to calm fears of a trade war.

Wall Street staged a late rally last night, as Larry Kudlow, president Trump’s new top economic adviser, insisted “There’s no trade war here,”.

Kudlow argued that people shouldn’t over-react to the news that America and China are threatening to slap tariffs on $50bn of each other’s good, suggesting that there is time to stave them off.

The City has got the message; the blue-chip FTSE 100 index has just jumped by 95 points at the start of trading.

We get fresh US trade figures later today, which will show whether Trump has had any success narrowing the trade deficit.

Plus, data firm Markit is releasing its latest healthcheck on Europe’s service sector.

The agenda

  • 9am BST: UK car sales for March
  • 9am BST: Eurozone service sector PMI for March
  • 9.30am BST: UK service sector PMI for March
  • 1.30pm BST: US weekly jobless figures
  • 1.30pm BST: US trade balance for February

Updated

 

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