Tariff fears drag markets down as EU and Trump trade blows – business live

 

Powered by Guardian.co.ukThis article titled “Tariff fears drag markets down as EU and Trump trade blows – business live” was written by Graeme Wearden, for theguardian.com on Monday 2nd July 2018 16.45 Asia/Kolkata

Over in California, Tesla’s employees should have enjoyed a good night’s sleep after finally hitting their production targets.

The electric carmaker succeeded in churning out 5,000 of its Model 3 model last week, after a major push which saw founder Elon Musk spend his birthday on the production line.

It was all worth it, though, as Musk told staff that :

“We did it! What an incredible job by an amazing team.”

Musk also tweeted about his jubilation….

…and found himself gently teased by the European boss of Ford:

Ford do have rather a headstart in car production, of course…

Updated

Copper price hits three-month low

A worker monitors a furnace at the MMC Norilsk Nickel PJSC copper refinery in Norilsk, Russia.
A worker monitors a furnace at the MMC Norilsk Nickel PJSC copper refinery in Norilsk, Russia. Photograph: Bloomberg/Bloomberg via Getty Images

The price of copper has hit its lowest level since late March, as investors fear that tariffs are hurting economic growth.

Reuters has the details:

Benchmark copper was down 0.5% at $6,585 a tonne at 1040 GMT from an earlier $6,550 a tonne, its lowest since March 26.

Prices of the metal used widely in power and construction have tumbled 10 percent since June 7.

“Investors are taking risk off the table because of trade tensions, which threaten Chinese exports to the United State sand also their profit margins,” said SP Angel analyst John Meyer. “Industrial metals rely on China.”

The selloff is partly due to this morning’s factory data, showing that Chinese factories suffered a drop in export orders last month.

The US stock market is expected to drop when trading begins in three and a half hours, following the lead from Asia and Europe.

The Dow Jones Industrial Average is being called down 167 points, or 0.7% while the S&P 400 is expected to drop 16 points or 0.5%.

A stock indicator in Tokyo today, where shares fell by over 2%.
A stock indicator in Tokyo today, where shares fell by over 2%. Photograph: Kazuhiro Nogi/AFP/Getty Images

Back the markets, shares continue to be buffeted by trade war worries.

The main European indices are all in the red, after Donald Trump and the EU both raised the ante in their ongoing tariff dispute. This follows those heavy losses in Asia, where major markets lost over 2%

Here’s the damage:

  • Britain’s FTSE 100: down 77 points, or 1%, at 7,558
  • French CAC: down 53 points or 1% at 5,270
  • German DAX: down 55 points or 0.5% at 12,250

Fiona Cincotta of City Index says markets are also suffering from the news that Canada has slapped tariffs on US imports (in retaliation for Donald Trump’s earlier actions).

She explains:

From Sunday Canada started imposing trade tariffs on $12.6 billion worth of American goods including iron, orange juice and whiskey in response to the US tariffs on Canadian steel and aluminium which were introduced on 22 June.

America’s northern neighbour joins the ranks of the EU and Mexico, both of which have also hit back against US import tariffs with tariffs of their own, with Mexico penalising imports of US pork, steel, cheese and apples and the EU levying duties on whiskey, motorcycles and orange juice.

Amid the trade whirlwind investors are now increasingly looking for stocks that will be the least effected by the tariff tit-for-tat although it is difficult to say what these stocks may be given that Donald Trump has already said he intends to respond with another set of trade tariffs in response to his trade partners’ reaction.

Finally, some good news. Unemployment across the eurozone is its lowest since the financial crisis began a decade ago.

The euro-area jobless rate was 8.4% in May, statistics body Eurostat reports, matching April’s figure. It’s the lowest reading since December 2008.

In the wider EU, unemployment was a healthier 7.0% – the best since August 2008, shortly before the collapse of Lehman Brothers triggered a global downturn.

Encouragingly, unemployment has fallen in every eurozone country in the last 12 months. But there are still wide disparities in the region.

Eurostat says:

Among the Member States, the lowest unemployment rates in May 2018 were recorded in the Czech Republic (2.3%) and Germany (3.4%). The highest unemployment rates were observed in Greece (20.1% in March 2018) and Spain (15.8%).

Experts: Trade war fears are hurting European factories

Economists are concerned by this morning’s factory growth figures from the UK and the eurozone.

Jeremy Thomson-Cook, chief economist at WorldFirst says there is weakness at the heart of the UK’s manufacturing sector:

Growth is lower as manufacturing business rely on backlogs and inventory building to keep machines working, something that cannot continue for too much longer.

Similarly, businesses are passing on higher costs to customers but there will be a limit as to how much those customers can or will take. Risks for the sector remain in everything from the weakness of sterling, the threat of trade tariffs and more difficult international trade terms, Brexit and those higher input prices from commodity markets.

The trend in UK manufacturing is one of weakness and this figure confirms that fact.”

Ms Lee Hopley, chief economist at manufacturing group EEF, is concerned that factory growth slowed across Europe last month:

With the rest of the EU being a dominant source of growth over the past year this slowdown, in part driven by fears about global trade tensions, could be a further signal of more weakness to come.”

Lee McDarby, Corporate IP Managing Director at moneycorp, thinks Brexit is making companies too nervous to invest right now:

“In normal times we would expect the weak pound, especially against the Dollar, to have translated into higher manufacturing growth. These are not normal times, however.

The weakness of sterling is reflective of investor concern about Brexit and the strength of the UK economy and it could be that these same concerns are holding back manufacturers from investing in growth

Newsflash: factory growth in Britain remained steady last month, but bosses are getting gloomier.

Markit’s UK manufacturing PMI has come in at 54.4 this morning, slightly up on May’s 54.3 (reminder, any reading over 50 shows growth).

UK manufacturing PMIs

But the survey also found that new order growth remained subdued, meaning companies relied on existing business and inventory building to keep their staff busy.

Markit says:

Although the rate of increase in new business edged up to a three-month high, it remained among the weakest registered over the past year- and-a-half.

Business optimism also dropped last month, to a seven-month low, Markit adds.

Some firms expressed concerns about input price increases, possible future trade tariffs, the exchange rate and Brexit uncertainty.

Updated

Eurozone factory growth hits 18-month low

Newsflash: eurozone factory growth has slowed to an 18-month low – another sign that trade war fears are hurting the economy.

Data firm Markit reports that output and new order growth at European firms has slowed this year, and that factory bosses are more pessimistic about future business.

This has dragged Markit’s eurozone manufacturing PMI, which tracks activity in the sector, down to 54.9 from 55.5 in May.

That’s the weakest reading since the start of 2017, and closer to the 50-point mark that shows stagnation.

According to Markit, factory production grew at the slowest pace since November 2016 while new business growth was the weakest since August 2016.

This pulled business optimism down to its lowest level in over two-and-a-half years.

The survey also found that France is lagging behind other eurozone nations:

Eurozone PMIs

Chris Williamson, chief business economist at IHS Markit, is particularly concerned that exports orders remain subdued:

The biggest concern is the extent to which export order book growth has cooled since the start of the year, and could soon go into decline. The survey reveals mounting worries from companies relating to the impact of tariffs and trade wars, suggesting firms are bracing themselves for the potential for further export losses.

Not surprisingly, business expectations for future production deteriorated in June to the lowest November 2015.

Updated

City economist Paul Donovan of UBS isn’t impressed by Trump’s claim that Europe is “as bad as China” when it comes to trade.

He says:

US President Trump sounded upset about Europeans selling Americans things Americans want to buy.

The Financial Times reports the EU is threatening to tax a fifth of US exports if the US imposes taxes on consumption of EU autos and auto parts. That would be a trade war. US carmakers are lobbying against the proposed US taxes, showing that tariffs are an outdated concept.

July has started in a “troubled mood”, says Connor Campbell of City firm SpreadEx, as he watches the main European markets slide into the red.

Europe’s main stock markets this morning
Europe’s main stock markets this morning Photograph: Thomson Reuters

Campbell blames the trade war fears that are rippling through trading floors today:

Trump kicked off July by targeting the EU, not China, saying that the region was ‘possibly as bad’ as Beijing in how it treats the US, ‘just smaller’.

This has sent the President’s previous threat of tariffs on EU car imports back to the top of investors’ ‘To Fear’ lists, with the added spice of a report from the Financial Times suggesting the European Union could respond in kind with tariffs of $300 billion on US products.

Financial stocks are also having a bad morning.

The Stoxx 600 banks index, which tracks Europe’s largest banks, has dropped by 1.9% in the first few minutes of trading.

FTSE stumbles into July

Britain’s FTSE 100 has fallen by 72 points, or almost 1%, at the start of trading.

That takes the blue-chip index of top shares down to 7574 points.

Mining companies are leading the selloff, with Rio Tinto and BHP Billiton both down over 2%.

That reflects the fact that demand for iron ore, coal, nickel, copper and oil will all fall if Europe and America hit each other with tit-for-tat tariffs.

Other European markets have also opened in the red, with the German DAX shedding 1.3% at the open.

Konstantinos Anthis, Head of Research at trading firm ADSS, says

Investors are worried about the stalemate in discussions within Angela Merkel’s Germany coalition government and Trump’s intention to slap China with more tariffs.

Chinese exports drop again as trade war looms

In a worrying sign, Chinese factories are suffering from falling export orders.

Data firm Caixin has reported that new export sales at Chinese manufacturing firms shrank last month, for the third month in a row. That may be a signal that Trump’s tariffs are already hurting global trade.

Caixin also flagged up that Chinese factories are shedding jobs, as some don’t have enough work lined up.

Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group, explains:

The index for new export orders fell to a low for the year so far and remained in contraction territory, pointing to a grim export situation amid escalating trade disputes between China and the U.S., which led to weak demand across the manufacturing sector.

Asian stock markets are a sea of red today, as traders fret about the prospect of a global trade war.

Every major share index is in the red, and many emerging market currencies are sliding against the US dollar again.

Donald Trump’s claim yesterday that Europe was treating the US unfairly has helped to drive markets down.

Jasper Lawler of London Capital Group says Europe’s threat to impose fresh tariffs on American goods has also alarmed investors:

A ramping up of trade war headlines over the weekend, such as a strong warning of retaliation from the EU and a potential currency war with China (US), will ensure that the fear of an all out global trade war is central in trader’s mind, as the session begins on Monday.

The agenda: Trump blasts Europe; EU threatens retaliation

SUVs of Range Rover, Mercedes Benz and BMW at the port of Bremerhaven, northern Germany.
Range Rover, Mercedes Benz and BMW cars at the port of Bremerhaven, northern Germany. Photograph: STRINGER/EPA

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

The second half of the financial year is beginning where the first half left off, with rising anxiety over a trade war.

Overnight, Donald Trump has launched a fresh attack on the European Union, claiming it treated the US very badly and was “possibly as bad as China, just smaller”.

Speaking on Fox News, the US president declared:

“Look what they do to our farmers, they don’t want our farm products. In all fairness they have their farmers so they want to protect their farmers.

“But we don’t protect ours and they protect theirs.”

Trump’s comments raise the prospect that the US could impose further tariffs on EU imports – possibly on car imports (something he threatened last month).

Europe isn’t taking Trump’s sledging lying down, though.

According to the Financial Times, the EU has threatened to retaliate with tariffs on up to $300bn of US products, if the US does indeed penalise EU carmakers.

The threat of retaliatory tariffs on US imports into Europe came in a written submission to the US Department of Commerce, outlining how the bloc would respond to Trump’s threats.

The FT’s Jim Brunsden explains:

Brussels said that an American investigation into whether foreign cars and parts posed a national security risk could plunge the global economy into a full-on trade war, harming employment in the US’s auto sector, which accounts for more than 4m jobs.

In a sign of the EU’s exasperation at Mr Trump’s confrontational trade policy, which has already stoked tensions over steel and aluminium, the document said the move “could result in yet another disregard of international law” by the US. It said imposing the car tariffs would not be accepted by the international community and would “damage further the reputation” of the US.

This has already sparked a selloff in Asia, where Japan’s Nikkei and China’s CSI 300 index have both shed 2%.

European markets are set for losses at the open too, with the FTSE 100 called down 50 points.

Also coming up today

Data firm Markit is publishing its latest Purchasing Manager Index (PMI) reports, showing how manufacturing companies across the world fared last month. They’ll show whether the threat of a global trade war has hurt factories.

And in Germany, Angela Merkel is still locked in battle with her CSU coalition over migration. Last night, the country’s interior minister reportedly announced his intention to resign – a move that could bring down the Chancellor’s increasingly shaky coalition.

Merkel and Horst Seehofer are due to hold fresh talks this afternoon, so the great survivor of European politics could yet see off another crisis.

Here’s the agenda:

  • 9am BST: Eurozone manufacturing PMI for June
  • 9.30am BST: UK manufacturing PMI for June
  • 10am BST: Eurozone unemployment figures for May
  • 3pm BST: US manufacturing PMI for June

Updated

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Tariff fears drag markets down as EU and Trump trade blows – business live - NORTH INDIA KALEIDOSCOPE

Rajesh Ahuja

I am a veteran journalist based in Chandigarh India.I joined the profession in June 1982 and worked as a Staff Reporter with the National Herald at Delhi till June 1986. I joined The Hindu at Delhi in 1986 as a Staff Reporter and was promoted as Special Correspondent in 1993 and transferred to Chandigarh. I left The Hindu in September 2012 and launched my own newspaper ventures including this news portal and a weekly newspaper NORTH INDIA KALEIDOSCOPE (currently temporarily suspended).