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Aug 24, 2018

Markets wary as US-China trade talks end without breakthrough - business live | Business I The Guardian

Nick Fletcher

UK mortgage approvals fall in July

The number of mortgage approvals by the main high street banks slipped last month compared to a year ago.
Approvals in July fell by 0.8%, but within this there was a 2.8% rise in existing households remortgaging ahead of the well-flagged interest rate rise earlier this month, according to data from industry body UK Finance.
Credit card spending was 8.1% higher that a year earlier, but annual consumer credit growth slowed to 3.7%.
Peter Tyler, director at UK Finance, said:
July saw steady growth in gross mortgage lending, driven largely by remortgaging as homeowners locked into attractive deals in anticipation of the recent base rate rise.
Card spending has also strengthened, reflecting increased expenditure during the holiday period and an uplift in retail sales due to the World Cup and warm weather.
However the broader economic outlook remains mixed, with households continuing to see their incomes being squeezed by rising inflation. This may explain the shift towards deposits held in instant access accounts, as consumers opt to keep their money close to hand.
Photograph: UK Finance

With the European Central Bank being the latest to warn of the dangers of growing protectionism (in Thursday’s minutes), here’s an interesting chart from HSBC (hat-tip Ransquawk):
RANsquawk (@RANsquawk)
What countries are most exposed to a rise in protectionism? via HSBC
August 24, 2018

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So would the markets crash if Donald Trump was impeached, as the president suggested? Paul Donovan, global chief economist at UBS Wealth Management, thinks not:
Impeachment (by the House) may be more likely than conviction (by the Senate), but neither seems highly probable. A conviction would lead to President Pence. Pence’s economic track record gives no grounds for assuming a negative equity reaction.

The markets may be fairly subdued at the moment, but it could be a lot worse, says Spreadex financial analyst Connor Campbell:
There wasn’t a lot to Friday’s open, the lack of progress between the US and China following the latest round of trade talks leading to a muted start to the session.
Given the amount of bad news out there at the moment – from Thursday’s trade talk-undermining tariff tit-for-tatting between the US and China, the ominous clouds of a no deal Brexit, and Trump’s potential legal problems – the markets have done well to not lose their heads this week.
The FTSE was unchanged after the bell, lurking just above 7560. The index failed to capitalise on a rebound from its mining stocks, that sector having been something of a burden in the last few sessions.
The pound, meanwhile, needs to try and claw back the losses it incurred followed Dominic Raab’s poorly received no deal Brexit advice on Thursday. It hasn’t been particularly successful so far: against the dollar it rose 0.1%, pushing cable above $1.283, while against the euro it actually slipped another 0.1%, keeping it the wrong side of €1.11 for the first time in over a fortnight.
As for the Eurozone indices, a solid second quarter German GDP reading – it was confirmed at 0.5% – allowed the DAX to nudge 20 points higher. The CAC, meanwhile, could only add a handful of points, pushing above 5425 in the process.

News of the latest prime ministerial appointment in Australia has seen a recovery in the country’s currency. Neil Wilson at said:
Australia’s dollar rose after Scott Morrison was voted the next prime minister. The Australian dollar/US dollar had sold off as Malcolm Turnbull was forced to resign, briefly touching on 0.720, its lowest since the start of 2017, before paring losses to trade around 0.7280. But the longer-term downtrend remains in play with trend resistance seen at 0.73750. Politics won’t be a factor for long for the Australian dollar, which tends to ride this kind of shenanigans –forex traders should be pretty used to a changing Australian prime ministers and will shrug it off quickly.

Cautious start for European markets

With the continuing trade row between the US and China, Trump’s travails and the spotlight on US interest rates, markets are making a cautious end to the week.
The FTSE 100 is virtually flat, Germany’s Dax is up 0.25%, France’s Cac has climbed just 0.12% while Italy’s FTSE MIB is up 0.1%.
On the trade dispute, Neil Wilson, chief market analyst at said:
With the US mulling $200bn in additional 25% tariffs, this is not going away. The real worry is what does China do then. While Beijing cannot match the US in terms of raw firepower as it imports far less from the US, it can respond with ‘qualitative’ measures, which could seriously impede US firms doing business in China.

The German GDP figures show that the country’s economy has not yet been hit too badly by the current trade tensions, says ING Bank economist Carsten Brzeski, although this could of course change:
German growth data suggest that at least in the second quarter, the ongoing trade tensions were a threat but did not leave any significant marks on the economy. Obviously, this could change in the coming months. Even though the EU seems to be off US radar screens at least for the time being, the series of German export partners being hurt by sanctions, tariffs or economic crises is getting longer. Just think of China, Russia, Turkey, Iran or potentially the UK. The strength of the German export sector has always been its diversity and the fact that it is not dependent on a single export partner. And while the weak euro should cushion any adverse effects stemming from tariffs or sanctions, the list of troubled countries should obviously not get too long.
While risks from the external side are increasing, the domestic side of the German economy offers both challenges but also opportunities. Just think of an increasingly complicated political landscape, too few new investments and structural reforms and supply-side constraints in the manufacturing sector. Many potential risks ahead but at least for now, there is only one good reaction to today’s growth data: enjoy and savour.
Porsche factory in Stuttgart-Zuffenhausen, Germany.
Porsche factory in Stuttgart-Zuffenhausen, Germany. Photograph: Ralph Orlowski/Reuters

Here are IG’s opening calls for European markets:
IGSquawk (@IGSquawk)
European Opening Calls:#FTSE 7559 -0.05%#DAX 12388 +0.18%#CAC 5426 +0.12%#MIB 20612 +0.02%#IBEX 9571 +0.03%
August 24, 2018

Agenda: Trade tensions in focus as US-China talks end

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There was little expectation that this week’s talks between the US and China to resolve their trade tensions would make much of a breakthrough. And so it proved, as they ended on Thursday with no real progress. President Trump had already set the tone, suggesting there was unlikely to be any quick resolution, and discussions can hardly have been helped by the two sides slapping a new range of tariffs on each others’ goods as the talks were underway.
White House spokeswoman Lindsay Walters said the officials “exchanged views on how to achieve fairness, balance, and reciprocity in the economic relationship” and the discussions including “addressing structural issues in China” including its intellectual property and technology transfer policies.
Later China’s finance minister Liu Kun told Reuters the country would keep hitting back at the US. He said:
China doesn’t wish to engage in a trade war, but we will resolutely respond to the unreasonable measures taken by the United States.
Economists at UniCredit said a new round of tariffs was likely to come into force in September, with the US targeting $200bn of imports from China: “Beijing is said to be willing to start new talks only after the US mid-term elections.”
So markets continue to be edgy as the row rumbles on, with Wall Street finishing in the red and Asian markets vacillated between negative and positive. European markets are expected to make a mixed start. David Madden, market analyst at CMC Markets UK, said:
A spokesperson for the Beijing administration described the meeting as ‘constructive’, but it sends a message to traders that this situation won’t be resolved quickly. The negative press surrounding President Trump isn’t boosting investor confidence either.
Indeed Trump declared that impeaching him would lead to a stock market crash, although the thing markets hate most is uncertainty, which is what we have here.
Elsewhere US Federal Reserve members speaking at the two day meeting of central bankers at Jackson Hole in Wyoming tried to make it clear that despite Trump’s criticism of their rate raising policy, they would not be swayed by his comments. CMC’s Madden said:
Esther George, the Kansas City Fed President issued an upbeat view of the US economy, as she believes the Federal Reserve can hike interest rates several more times before it can get to a ‘neutral’ position. Ms George made it clear that President Trump’s views regarding the hiking cycle, will not influence the central bank. Robert Kaplan, Dallas Fed President, reiterated the independence of the Federal Reserve, making it clear that Mr Trump’s won’t influence decisions in relation to interest rates. The stimulus effect is boosting the economy, but it will start to fade in 2019, according to Mr Kaplan.
There is little economic news expected, with US durable goods due at 1.30 UK time.
We have already had the latest German GDP figures, which showed a 0.5% rise in the second quarter, the same as the previous three months and in line with expectations. Year on year the figure was 2.3%, again as forecast.

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