Markets continue to drift as the concerns about the US-China trade rift continue, along with uncertainty about how the problems facing Donald Trump will play out.
The FTSE 100 is currently up just 0.17%, Germany’s Dax is up a similar amount while France’s Cac has climbed 0.37%.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back next week.
A positive sign for the US economy with better than expected capital goods orders.
The Commerce Department said new orders for non-defence capital goods excluding aircraft – seen as a key indicator for business investment – climbed by 1.4% in July. This is sharply higher than June’s figure of 0.6% – itself revised upwards from 0.2% – and better than the forecasts of a 0.4% increase.
But overall orders for durable goods decreased by 1.7% as demand for civilian aircraft – a volatile measure – fell.
Back with Trump and Italy:
Here’s our story on the latest housing data:
Mortgage lending in Britain dropped last month before the Bank of England raised interest rates above the level set since the financial crisis, new banking industry figures show.
The industry body UK Finance said the number of mortgages approved for new house purchases dropped by 4.3% in July to 39,584 compared with the same month a year ago. City economists had forecast around 40,700, suggesting a renewed slowdown in the housing market.
Threadneedle Street raised the cost of borrowing earlier this month, making it more expensive for prospective homeowners to secure a mortgage, while concerns about a no-deal Brexit are also discouraging buyers. Analysts said the rise in rates to 0.75% from 0.5% could further weigh on demand for mortgages.
Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said the figures demonstrate the housing market is fundamentally slowing, adding: “The hike [from the Bank of England] will unnerve many buyers.”
The full report is here:
Trump offered to buy Italian bonds – newspaper
President Donald Trump offered to buy Italian sovereign bonds when he met prime minister Giuseppe Conte at the White House last month, according to the Corriere della Sera newspaper.
Rome is scheduled to issue about €400bn worth of debt in 2019, and recent political uncertainty has seen a jump in Italian borrowing costs as investors move out of the country’s bonds.
The paper said that while Italy is keen to find new investors, it was unclear how the US could step in to guarantee the debt.
Here’s the view from an ING strategist:
And here’s the market reaction:
Italy’s FTSE MIB is currently up 0.75%, outpacing other European markets.
Three senior executives at TSB, which suffered a disastrous IT meltdown beginning in April, are leaving the bank, according to the Financial Times.
Ian Firth, Rachel Lock and Nigel Gilbert – TSB’s treasurer, head of human resources and chief marketing officer – are all set to depart, says the report (£).
The fiasco is the subject of independent investigations, and helped push the bank into a loss for the year:
ScottishPower announces more price increases
ScottishPower has become the fourth of the big six energy suppliers to announce a second price rise this year, in response to rising wholesale prices.
Around 900,000 customers on the firm’s default tariff will be hit with a £46 price hike from 8 October, pushing up their annual dual fuel bill 3.7%, to £1,257. The bad news for consumers comes on top of a 5.5% hike by ScottishPower in June.
The company, which is owned by Spanish energy giant Iberdrola, blamed wholesale electricity and gas costs, which it had said had increased more than a fifth since April. Analysts have warned householders to expect further price rises, and one challenger firm, Bulb, has told customers a third rise this year is likely.
Oil price continues to rise
Oil is being lifted again amid signs that US sanctions on Iran are beginning to have an impact on supplies.
Brent crude is up 0.8% at $75.33 a barrel while US crude has climbed 0.9% to $68.45.
The US government re-imposed sanctions on Iran this month after it withdrew from a 2015 international nuclear agreement. Jason Gammel, equity analyst at investment bank Jefferies, said:
Multiple third-party reports indicate that Iranian tanker loadings are already down by around 700 kbd in the first half of August relative to July, which if it holds will exceed most expectations. We expect that by the fourth quarter the market will be dealing with either undersupply, dwindling spare capacity – or both.
The UK mortgage figures are weighing on housebuilders, with Berkeley Group, Persimmon, Barratt Developments and Taylor Wimpey all down around 1%. A downgrade on Persimmon from analysts at Canaccord is not helping the sector. Chris Beauchamp, chief market analyst at IG, said:
In thin August trading housebuilders have taken a knock as a double whammy of lower new approved mortgages and a five-month low in net mortgage lending weighed on the sector. Fortunately, the lower weighting for the likes of Taylor Wimpey in the FTSE means that these losses have been easily countered by gains for mining stocks off the back of a weaker US dollar.
So overall the FTSE 100 remains virtually unchanged, edging up 0.12%.
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.
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):
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 Markets.com 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 Markets.com 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.
Here are IG’s opening calls for European markets:
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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