And finally, here’s our latest piece on the US-China trade dispute:

The ISM report also shows that the US-China trade spat is pushing up costs for companies.

One executive at a construction firm warned:

“Tariff-related cost increases are beginning to accelerate, whether tariffs have been put into effect or not.”

Another business leader, though, is expecting a record-breaking month:

“Based on current trends on customer quote requests and conversions to orders, we are trending for this month to be the best August in the history of our company.”

America’s service sector grew strongly last month, according to the latest PMI report from the Institute of Supply Management.

The ISM Services index jumped to 58.5 for August, up from 55.7 in July, signalling faster growth.

Companies reported a pick-up in new orders (including exports) and overall activity, suggesting the US economy remains in decent fettle.

Wall Street has opened cautiously, with the Dow Jones gaining 72 points or 0.3%.

Facebook and Twitter are lagging, though, as the fallout from yesterday’s Congress investigation into social media, and foreign interference in elections.

Trade war and emerging market jitters are weighing on the City today.

The FTSE 100 is down 10 points, or 0.1%, having closed at a four-month low yesterday.

That’s despite energy firms rallying. Centrica is up 5.3%, after the government outlined plans to cap bills. The plan will save households around £75 each -- good news, but not as much as PM Theresa May had promised...

Some better jobs news just arrived: the number of Americans signing on for unemployment benefit hit its lowest level in almost 50 years!

Initial claims for jobless benefits dropped by 10,000 last week to 203,000, the smallest number since December 1969.

It extends a long run of decent US employment data, which hasn’t been derailed by the trade wars (yet, anyway).

Newsflash: American companies created fewer jobs in August than in July, and less than expected.

US payroll operator ADP has reported that 163,000 private sector jobs were created last month, down from 217,000 in July. Economists had expected a figure close to 190,000.

It may be a sign that Friday’s US jobs report (the non-farm payroll) will miss expectations.

Some lunchtime reading: Joseph Stiglitz on how policymakers have failed to make the right decisions since the financial crisis a decade ago:

The Economist Intelligence Unit’s global economist, John Ferguson, believes emerging market tensions will continue to build over the next couple of years.

Here’s his take on the EM situation:

• “Most emerging-market economies should be able to weather this pace of economic tightening, provided that their trading conditions remain favourable. However, investors are on the alert for financial, economic or political weaknesses.”
• “The turbulence experienced by Argentina and Turkey in mid-2018 is a reminder of how difficult it can be for policymakers to regain market confidence where external imbalances are large and macroeconomic policy frameworks are fragile.”
• “For now, a full-blown emerging-market crisis should be averted, but we expect the number of countries seeing their currencies come under pressure to rise over the next two years. It is likely that we will see periods of volatility as the global trade dispute interacts with the shift away from easy money.”

The EM selloff has pulled world stock markets down for the fifth day in a row.

The losses in Asia overnight, followed by the early dip in Europe, pulled the MSCI All-Country World Index down by another 0.2%.

The drop in German factory orders added to concerns that trade war rhetoric, and tariffs, is causing economic harm.

Economists are also concerned that the problems in certain emerging market economies are now spreading across the sector, and beyond.

Kit Juckes of Societe Generale says:

As global monetary conditions slowly tighten, the global economic cycle rolls over and the US President disturbs the global trade cycle, there’s definitely more to the emerging markets sell-off than a few unrelated spots of weakness.

Hussein Sayed, chief market strategist at FXTM, agrees that contagion risks can’t be ignored.

Crashes in the Argentine Peso and Turkish Lira were first believed to be idiosyncratic risks that wouldn’t lead to any spillover. But now it looks like the concern over contagion risks are spreading to all asset classes. EM equities entered into a bear market, falling 20% from their January peak.

The Indonesian Rupee, Indian Rupee, South African Rand, and several other EM currencies are either trading at record or multi-year lows.

Investors who have been on the sidelines may think of the selloff as a good opportunity to start accumulating some oversold EM assets. However, the prospects of more U.S. interest rate hikes, and continuing global trade tensions make it difficult to jump in.

Germany’s industrial belt has taken another hit from the US-China trade war:

German industrial orders shank by 0.9% in July, new figures show, driven by a drop in overseas demand.

Economists had expected a rise of 1.8%, following a 3.9% slump in June. But instead, manufacturers reported another decline:

Although domestic orders rose, German factories suffered from weaker business overseas, as Destatis explains:

Domestic orders increased by 2.4% and foreign orders decreased by 3.4% in July 2018 on the previous month.

New orders from the euro area were down 2.7%, new orders from other countries decreased 4.0% compared to June 2018.

European stock markets have hit a five-month low this morning.

The emerging markets rout, and fears of an escalating trade war, drove the Stoxx 600 index down to its lowest since early April.

In London the FTSE 100 dipped to a new four-month low in early trading, at 7,357.

Last night, the Financial Times calculated that emerging markets are now officially in a bear market -- defined as falling 20% from their recent high.

Capital Economics fears that the emerging market rout has further to run:

We think that the US Federal Reserve will press ahead with its tightening cycle, and worries about contagion from the crisis in Turkey may linger.

At the same time, we expect China’s economy to slow further, and are not anticipating a ceasefire in the US-China trade war any time soon.

This snapshot of the markets, from Bloomberg TV, shows how stock markets have lost ground (first column).

The second column shows currencies dropping against the US dollar.

Today’s selloff has wiped more than 1% off the main Chinese stock index, the CSI 300.

Hong Kong’s Hang Seng is down almost 1.5%.

Australia’s market has lost 1.1%. That’s it’s biggest one-day loss since March, taking the index to a two-month low.