And finally...here’s my colleague Richard Partington on the escalating US-China trade war.

China has unveiled plans to impose retaliatory tariffs on US imports worth $60bn (£46bn), firing the latest volley in the mounting trade dispute between the world’s two largest economies.

Signalling the nation’s readiness to respond to the higher tariffs threatened by Donald Trump on $200bn of Chinese imports, officials in Beijing said countermeasures were ready and waiting for the next move from Washington.

The Chinese finance ministry said 5,207 goods imported from the US could be subjected to the fresh tariffs, with levies ranging from 5% to 25% on products including aircraft, soya bean oil, smoked beef, coffee and flour.

The move comes after Trump asked US trade officials to consider imposing a 25% tariff on $200bn of Chinese goods, up from the 10% level originally proposed last month, as the two countries attempt to reach an agreement on trade. China said at the time blackmail would not work and that it would hit back.

Speaking just hours after China unveiled the countermeasures on Friday, Larry Kudlow, Trump’s chief economic adviser, said the US president was willing to follow through with his threats, in a stark warning to Beijing.

Calling the Chinese economy weak from the lawn of the White House in an interview with Bloomberg TV, Kudlow said: “The president has said time and again, that targeted tariffs are going to be part of the gameplan with China – unless, and until, they begin to meet our requests, and so far they have not.

“They better not underestimate President Trump’s determination to follow through on our asks.”....

Here’s the full story:

So, with the US stock market up a bit (the Dow has gained 99 points or 0.3% to 25,425 points), that’s all for today. Goodnight! GW

Bad news for European consumers - the cost of vegetables, bread and even beer is being driven up by the hot summer.

With crops struggling in the fields, supermarkets are finding it hard to get produce - so the law of supply and demand is kicking in.....

Here’s my colleague Ed Helmore on the latest US employment data:

The London stock market has closed higher this afternoon, despite the latest trade war tensions.

The blue-chip FTSE 100 gained 83 points, or 1.1%, to finish at 7,659 points.

The French and German markets also gained around 0.5%, even though their economies could be hit in a trade war.

Connor Campbell of SpreadEx says traders shrugged off the tariff threat:

Despite Beijing preparing its own retaliatory ‘import tax’ on $60 billion of US goods if Trump goes ahead with his planned tariffs on $200 billion of products from China, the markets managed to continued their end of week rebound on Friday.

UK shares benefitted from the weaker pound, he points out:

Sterling spending the day sporadically ducking under $1.30 against the dollar following July’s disappointing services PMI and Mark Carney’s threat that chances of a no-deal Brexit are ‘uncomfortably high’.

Larry Kudlow has reportedly cocked a snook at China’s retaliation:

China can’t actually retaliate like-for-like, though, as it’s total imports from America don’t add up to $200bn

Larry Kudlow has now told reporters that there have been top-level talks between the US and China on trade.

Rreuters has the details:

President Donald Trump’s top economic adviser, Larry Kudlow, said on Friday there has been some communication “at the highest level” on trade between the United States and China in recent days.

Kudlow, answering questions from reporters on the WhiteHouse driveway, would not say who was involved in the communication or what was discussed.

CNN has more details of China’s latest tariff threat:

Products in line for tariffs include meat, coffee, nuts, alcoholic drinks, minerals, chemicals, leather products, wood products, machinery, furniture and auto parts.

By announcing new proposed tariffs, China risks throwing fuel on its already smouldering trade war with America.

Here’s Bloomberg’s take:

Duties ranging from 5 percent to 25 percent will be levied on 5,207 kinds of American imports if the U.S. delivers its proposed taxes on another $200 billion of Chinese goods, the Ministry of Finance said in a statement on its website late Friday.

The retaliation stands to further inflame tensions between the world’s two biggest economies and echoes China’s response to the previous round of tariffs which took effect last month.

President Donald Trump this week ordered officials to consider imposing a 25 percent tax on $200 billion worth of imported Chinese goods, up from an initial 10 percent rate. The move was intended to bring China back to the negotiating table for talks over U.S. demands for structural changes to the Chinese economy and a cut in the bilateral trade deficit.

James Knightley of ING agrees the America’s jobs market remains strong, despite July’s slowdown.

2017 averaged 182,000 jobs per month whereas the first 7 months of 2018 have averaged 215,000 job gains. This will help underpin consumer sentiment and spending through the rest of the year.

Knightley also believes that Donald Trump’s tax cuts will cushion the economy from the ongoing trade disputes.

There are certainly worries about protectionism and its potential economic impact, but we also have to remember that the stimulus from tax cuts dwarfs the tax hit from higher tariffs. As such we are still expecting the US economy to expand 3% this year.

The US jobs report shows that manufacturers took on 37,000 new staff last month.

Construction employment rose by 13,000, while service sector firms provided the bulk of the new jobs.

Paul Ashworth of Capital Economics explains:

We need to be a little careful with the manufacturing number, however, since 13,000 of those jobs were in motor vehicle manufacturing, which is often distorted upwards in July because fewer plants close down for annual retoolings now.

Services employment increased by a relatively modest 118,000, although jobs in the better-paid professional & business services increased by 51,000.

Despite job creation slowing last month, America’s labo(u)r market still looks fairly robust.

As Kully Samra, Vice President at Charles Schwab, points out:

Wage growth is steady month on month and unemployment remains near its 18 year low.”

However, there are risks on the horizon, including a trade war and the prospect of rising interest rates:

Trade isn’t the only cause for concern—investors are also eyeing the rising value of the dollar, slowing global economic growth and the possibility that the Federal Reserve could raise short-term interest rates too much and choke off domestic economic growth.

However, US companies have strong balance sheets and tax reform has made it attractive to repatriate even more of their cash from foreign countries. That money can fuel business investment, expansion and stock buybacks.

Wall Street isn’t impressed by today’s jobs report:

Here’s a audio clip of Mark Carney speaking this morning, explaining how the UK economy has underperformed since the Brexit vote and why a ‘no deal’ exit should be avoided if possible:

In other financial news, Royal Bank of Scotland took another step towards normality this morning by finally reinstating its dividend.

OK, it’s only 2p per share, but it is some relief for long-suffering shareholders who have been waiting a decade for this to happen.

The UK taxpayer is one winner, picking up £149m thanks to the government’s majority stake in the bank.

Mark Carney also suggested this morning that UK interest rates could be cut under some Brexit scenarios (a comment he also made yesterday after, err, raising borrowing costs).

This is helping to keep the pound close to an 11-month low, says Lee McDarby of foreign exchange firm Moneycorp.

Despite the interest rate hike, confidence shown by the Bank’s monetary policy committee is not being reflected by UK businesses.

We’re seeing the Pound trading lower on Carney’s ‘no deal’ Brexit scenario, suggesting that economic uncertainty is still front and centre in the minds of decision-makers.

A Hard Brexit might not plunge Britain into a deep recession, but it might lock the country into a long period of weakness.

So argues Kit Juckes of French bank Societe Generale, who predicts that it would hurt (but not sink) the pound:

Bank of England Governor Mark Carney says that the chance of a no-deal Brexit is uncomfortably high. That’s a pretty dismal prospect for growth and an awful one for the public finances. It would be bad for the pound but from current low levels, the risk is that we face years of a weak currency rather than another huge move lower....

A ‘Hard Brexit’ which we define as ending access to the single market and taking the UK out of the customs union... is our central case. We think it results in real GDP growth being about 0.5% lower per annum than would have been the case otherwise, for up to 10 years.

We think this will result in sterling trading about 5% lower than current levels on a trade-weighted basis in the next few years, back to the 2008 lows, but not to or through the 1976 lows in real terms. For EUR/GBP it suggests a return to levels around 0.95, but not a break of parity.

Kit also points out that the pound’s all-time nadir was in 1976, when the government called in the International Monetary Fund to help prop up the nation’s finances. It also plunged on Black Wednesday in 1992, and during the financial crisis.

Having tumbled after the 2016 referendum, how much further could the pound slide in 2019 if Brexit goes badly? Kit writes:

The question all of this begs, is whether ‘Hard Brexit’ would be worse than 1992, 2008 and 1976. In 1976 and 1992, the UK was coming out of recession (a mild one in 92, a deep one in 1976).

In 2009 the UK was in its deepest post-war recession. Today’s 1.2% y/y growth rate is respectable by contrast.

Mark Carney’s intervention on Brexit today shows that the Bank of England is getting nervous about the pace and progress of negotiations.

As Bloomberg puts it:

Mark Carney threw himself back into the thick of the Brexit debate on Friday, saying the chance of the U.K. dropping out of the European Union without a deal is “uncomfortably high.”

The intervention suggests the Bank of England governor is growing increasingly worried that Prime Minister Theresa May’s government is running out of time to hammer out an agreement that will prevent disruption to business, trade and consumers. The central bank has previously drawn criticism for being too forthright in its comments and predictions surrounding Brexit, which anti-EU lawmakers see as being overly gloomy.

In a BBC Radio interview on Friday, Carney said a disorderly Brexit is “highly undesirable.” The pound weakened below $1.30 as he spoke and was down 0.3 percent at $1.2982 as of 8:56 a.m. London time.

Carney also said that a no-deal Brexit is “a relatively unlikely possibility, but still a possibility.”

Mark Carney’s anxiety about Brexit won’t help Britain’s service sector companies recover from their July stumble, says James Knightley of Dutch bank ING.

Here’s his take on this morning’s services PMI report:

The report compiler cited Brexit worries as a key factor holding back investment. The uncertainty it generates means it’s probable that businesses will become more wary about putting money to work in the UK.

Mark Carney’s warning this morning that the risk of a no deal Brexit is “uncomfortably high” isn’t exactly going to help stimulate businesses into action either.

Services makes up around three quarters of the UK economy, so the drop in growth in July is significant.

Another worrying sign: employment growth across the sector fell to a near two-year low. Some companies blamed the tight labour market; others said they were automating business processes so they could run with fewer staff.

Britain’s banking sector would cope if the UK crashed out of the EU without a transition deal, the Bank of England believes.

Mark Carney insists that the banks are much stronger than before the financial crash, and could weather a crisis at home or abroad.

So even if Britain and Brussels can’t reach a deal, we shouldn’t expect a run on the banks.

“The UK financial system has tripled the amount of capital they had over the course of the last several years, they have increased the amount of liquidity - the money they have on a day-to-day basis - by 10 times over the course of the last several years.

“The reason they have done that is to be in a position to be able to withstand a shock, wherever the shock comes from - it could come from China, it could come from abroad, it could come from a no-deal Brexit.

“We have meticulously gone through the types of risk associated with a no-deal Brexit.

Mark Carney also warned that a “no deal” Brexit would disrupt UK trade, hurting growth:

“As a consequence of that [there would be] a disruption to the level of economic activity, higher prices for a period of time.

Hosting the football World Cup gave Russia’s economy a lift.

Growth in the Russian service sector jumped in July, according to Markit’s monthly healthcheck.

It says:

The IHS Markit Russia Services Business Activity Index – a single-figure measure designed to track changes in total Russian services activity – posted 52.8 in July, up from 52.3 in June.

The latest expansion in business activity was solid despite remaining below the long-run series average. Where a rise was reported, panellists linked this to greater new order growth and an increase in activity following the recent football World Cup.