Graeme Wearden 

Markets surge on trade war optimism; Trump urges Opec to ‘relax’ – business live

Shares surge in Asia and on Wall Street after president Trump delays a planned hike in Chinese import tariffs
  
  

US-China trade talks have been extended, with president Trump citing ‘substantial progress’ in
US-China trade talks have been extended, with president Trump citing ‘substantial progress’ in recent weeks Photograph: Johannes Eisele/AFP/Getty Images

Europe closes higher

And finally (I think), European stock markets have closed higher.

Italy’s FTSE MIB led the way, gaining almost 0.9% amid relief that Fitch has left its credit rating unchanged.

Germany’s DAX rose by 0.5%, and the French CAC picked up 0.35%, as industrial groups and technology firms benefitted from trade war détente.

The FTSE 100 only gained five points, or 0.07%, though. It was partly dragged down by falling energy company shares (hit by the drop in the oil price).

Davod Madden of CMC Markets has picked out some of the key moves today:

Persimmon shares are in the red after it was reported over the weekend that it might be stripped of its ‘help to buy’ status. The home builder has benefited greatly from the government scheme which assists first-time buyers get onto the property ladder. Persimmon has been subject to complaints in relation to property standards and the government is reviewing which companies will be allowed participate in the scheme after 2021, and investors are worried Persimmon might be excluded. The stock gapped lower this morning, and while it holds below the 200-day moving average at 2,370p, its outlook should remain negative.

Associated British Foods confirmed that Primark’s first-half like-for-like sales dropped by 2%, and analysts were expecting a 1.6% decline. Total revenue increased by 4% for the period, but traders were expecting 4.8% growth. The firm performed well in Spain, France and Italy, but underperformed in Germany. Total UK Primark sales ticked up 2% and the US operation performed ‘strongly’, and full-year guidance remains unchanged. The stock has been in decline since November, and a break below 2,200p might bring the 2,000p region into play.

Provident Financial has knocked back a £1.3 billion offer from Non-Standard Finance. Provident described the move as highly ‘opportunistic’, and they felt the bid does not reflect the company’s true value. The share price of Provident Financial sold-off greatly in 2017, and hasn’t recovered, and Provident feel the bid would be undervalue the firm.

Neil Wilson of Markets.com also senses the US stock market is reaching a crunch moment....but will the rally subside, or crack on?

One upbeat tweet does not a trade deal make.

While Donald Trump insisted that “substantial progress” has been made with China, we still don’t know what - if any - concessions Beijing has made.

And with both sides keen to get a deal, some US hardliners fear the president might let the Chinese officials off too easily.

The Financial Times suspects this could lead to a backlash, saying:

Among the biggest unanswered questions is the extent to which China has offered any meaningful concessions on some of its core economic policies that US negotiators have been seeking to reverse. On Sunday, Mr Trump justified his decision to keep negotiations alive and not proceed with higher tariffs by citing “substantial progress” on structural issues such as China’s pervasive use of industrial subsidies or the protection of American intellectual property from theft or forced transfer. Yet there is scant evidence that Beijing has offered to make a big change in course, or to provide a mechanism to assure Washington that it will stick by any commitments.

“I don’t think any agreement will resolve the underlying problem,” said Wang Wen, executive dean of the Chongyang Institute, a think-tank under Renmin University. “The difference is very great and so we can only approach it bit by bit. This time we can only sketch the broad outlines.

More here: Donald Trump risks political backlash as deal grows more likely

Stocks are sneaking a little higher on Wall Street now, putting the Dow Jones industrial average 200 points higher at 26,233 points (up 0.8% today).

The tech-focused Nasdaq is up 1%, on hopes that technology companies will be spared higher tariffs on Chinese-made components.

Donald Trump has returned to one of his favourite hobbies - tweeting about the stock market:

He’s right, too. The Dow closed at 18,259 points on 7th November 2016, before the Trump’s shock victory over Hillary Clinton was announced. Trump’s subsequent tax cuts programme then helped to pump up the market, with companies announcing share buyback programmes and higher dividends.

GE (now up 11%) and Danaher (+7.4%) are leading the Wall Street risers, thanks to their bioscience deal.

They’re followed by hard drive maker Western Digital (+4.8%) and chipmaker AMD (+4%), with retailer Macy’s and tiremaker Goodyear (both +3.1%) close behind.

This is keeping the S&P 500 at a three-month high, following the Chinese market’s best day since 2015.

Randeep Somel, Director of Global Equities at M&G, believes we could see further gains - if presidents Trump and Xi sign off a deal soon.

Should the talks conclude positively it will likely be received positively by global markets particularly those sectors and companies that are reliant on global trade; from Boeing and Apple in the US, global shipping companies, to semiconductor manufacturers in China. The Chinese market will likely see the most positive reaction as there are signs the domestic economy is slowing down and this uncertainty disappearing will likely be a welcome stimulant.

Both sides reacted positively to the latest rounds of talks but did comment that bilateral trade deals are “complicated and arduous.” With the 2020 elections in the US approaching, President Trump will have the added impetus of wanting to show the American electorate that he has delivered on trade policy.

The US stock market has nearly recovered all last autumn’s losses, thanks to its rally this year.

Market analyst David Jones suggests this could lead to volatility -- will traders be tempted to cash profits, or will they decide the worst is over and pile into equities?

Industrial groups and tech firms are leading the rally in New York, as trade war optimism ripples across Wall Street.

Shares in GE have surged by 13% after it agreed to sell its biopharmaceutical business to rival conglomerate Danaher in a $21.4bn all-cash deal.

Wall Street jumps on trade war relief

Ding Ding! The New York stock market has hit a fresh three and a half-month high at the start of trading.

Shares are rallying across Wall Street, following the news that president Donald Trump has dropped his threat to raise tariffs on $200bn of Chinese imports from 10% to 25% on March 1st.

The S&P 500 index has gained 0.6%, or 16 points, to 2,809 - its highest level since early November. The Dow is up 174 points, or 0.67%, to 26,205.

Neil MacKinnon, global macro economist at VTB Capital, says the financial markets are enjoying a Happy Monday (a change from the bellyaches at the end of 2018).

Trump’s decision to extend the deadline for a trade deal is largely reponsible, MacKinnon says:

There is also talk of a summit at some point between the US and China, at which an agreement over trade can be reached. The US-China trade dispute has been a drag on the global economy and world trade for over a year and Asian export growth has slumped. Now a key negative for both the global economy and global markets looks as though it is being removed. In addition, geopolitical risk is mitigated by the Trump-Kim Summit in Hanoi on Wednesday.

If a trade deal is achieved, then the risks of a global recession should recede, MacKinnon adds:

A US-China trade agreement might trigger a recovery in demand and investment as a key uncertainty is removed.

Cambridge University economist Helen Thompson points out that the oil price is already lower than during previous Trump attacks on Opec - a sign that the global economy has slowed.

Updated

Oil price falls after Trump tweet

US crude oil has fallen sharply since Donald Trump urged OPEC to relax - and stop cutting production.

A barrel of New York light crude is now changing hands at $55.96 per barrel, down 2.5% from $57.53 earlier today. Traders are calculating that White House will encourage the oil cartel to keep the pumps open.

Crude oil prices have risen by roughly a quarter during 2019, after Opec agreed to cut production.

So will Trump’s latest twitter blast have a major impact? Analysts aren’t sure, as Bloomberg explains:

“We might see a less aggressive stance on supply cuts from the Saudis -- this might stop them from cutting deeper,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.

“But I still think Saudi Arabia has the incentive to see higher oil prices, and deliver the cuts agreed in December,” when OPEC and its partners agreed to remove 1.2 million barrels a day.

Updated

Today’s tweet is the eighth time that @realdonaldtrump has challenged Opec to take action to lower the oil price, points out analyst John Kemp:

Warren Buffett has also brushed aside the idea that wealthy people would flee America if they faced a higher tax burden.

In a refreshing blast of realism, Buffett tells CNBC that most rich people, if they were sane, would rather be taxed half of their wealth and stay in the US rather than leave and keep the lot.

The wealthy are under-taxed relative to the rest of the population.

Buffett also points out that America’s finances are “out of whack” right now, with the Trump White House running a one trillion dollar deficit during a time of growth. The solution - spend less, or tax more.

Veteran investor Warren Buffett has welcomed Donald Trump’s decision to to extend negotiations with China, rather than impose higher tariffs on half its exports to the US.

Speaking on CNBC, Buffett said he was “relieved” there is a chance that a deeper trade war can be avoided, saying it would be “bad for China, and bad for us”.

Buffett hopes that the two sides will work out “something sensible” that they can both accept, rather than descend into damaging protectionism, saying

Negotiations are tough, this is a big deal to both countries, and to some extent you’re playing a game of chicken....

Donald Trump is awake, and tweeting that Opec should chill out.

What has prompted this? Well, US crude oil prices have risen over $57 per barrel in recent days, for the first time since November. Brent crude has hit a three-month high around $£67/barrel, which will push up transport and heating costs.

That follows OPEC’s recent decision to cut supply; US sanctions against Iran and Venezuela’s oil exports have also hit supply, putting upward pressure on crude.

Trump’s tweet is already hitting prices....

Updated

Reach raises phone hacking bill, again

The cost of the UK phone hacking scandal continues to climb.

Reach, the publisher of the Mirror, Express and Star newspapers, has set aside another £5m to cover “historical legal issues”. That takes its total provision to £75.5m.

Reach blames “increased legal fees for the claimants’ lawyers” for this latest increase, which follows an extra £7.5m announced in June.

You could fill a dinner party with celebrities who have sued Reach, saying their voicemail messages were wrongfully intercepted by its journalists. Elizabeth Hurley, Sadie Frost, Jeffrey Archer, Patsy Kensit, Denise van Outen, Sophie Ellis-Bextor, Kevin Keegan, Charles Clarke (ex-home secretary) Les Dennis, Natasha Kaplinsky, Steve McFadden, Danielle Lloyd, Jennifer Ellison, Dwight Yorke and Andrew Cole have all reached settlements with the company over phone hacking.

Reach also announced a jump in revenues, following the takeover of the Express and Star. But it posted a pre-tax loss of £120m last year, after taking a £200m writedown on the value of its goodwill, publishing rights and titles.

It put some of the blame on Brexit, saying:

“This reflects the more challenging than expected trading environment for advertising revenue generated locally and the short term uncertainty arising from the UK’s exit from the European Union.”

In other news, UK property magnate Hammerson is in talks to sell off more than £900m of property after being hit by the crisis in Britain’s retail sector.

Hammerson, which owns shopping centres including Birmingham’s Bullring and London’s Brent Cross, has been burned by the wave of store closures and company collapses.

My colleague Julia Kollewe explains:

Among Hammerson’s tenants are Patisserie Valerie, which went into administration last month but was saved from closure by a management buyout backed by an Irish private equity firm, as well as House of Fraser and New Look.

Both resorted to company voluntary arrangement to avoid insolvency, which forced the firms to close a string of stores and seek rent cuts from their landlords.

Back in Beijing, government officials have said a US-China trade deal is getting closer....

Reuters has the details:

The Chinese government’s top diplomat, State Councillor Wang Yi, told a forum in Beijing on Monday that the talks had made “substantive progress”, providing positive expectations for the stability of bilateral ties and global economic development, China’s Foreign Ministry said.

China’s official Xinhua news agency said in a commentary that the goal of an agreement was getting “closer and closer”, but also warned that negotiations would get more difficult as they approached the final stages.

“The emergence of new uncertainty cannot be ruled out, and the long-term nature, complexity, and difficulty of China-U.S. trade frictions must be clearly recognized,” Xinhua said.

The post-Brexit derivatives deal hammered out by the US and the UK should be welcomed by the City - here’s the latest reaction:

Britain and US sign Brexit derivatives deal

Just in: The UK and the US have reached an agreement to ensure that derivatives trading can continue between the two countries after Brexit.

The deal means that City banks and clearing houses will be free to provide services to US clients as they do today, under existing EU rules. This continuity could protect a massively important part of London’s financial sector, as it braces for Brexit disruption.

It follows negotiations between the Bank of England, City watchdog the FCA, and regulators at America’s Commodity Futures Trading Commission.

BoE governor Mark Carney says the deal will provide continuity, and avoid the fragmentation of the derivatives market - which could raise costs and financial risk.

Derivatives contracts are pegged to the value of an underlying asset, allowing companies to protect themselves against falls in commodity prices, for example, or currency fluctuations. The derivatives market is worth trillions of pounds per year, many contracts settled in London.

CFTC chairman Christopher Giancarlo is in London to announce the deal, which he says is important to the high streets of Britain and the main streets of America.

What happens in global derivatives markets has a material impact for the man or the woman on the Clapham Omnibus, the Santa Monica freeway or the Tokyo subway.

Derivatives markets influencing the price and availability of heating on homes, the rates on home mortgages, and the return on people’s savings, Giancarlo adds.

Updated

Share in European carmakers have jumped by over 1.5% this morning, to their highest level since last November.

Many EU auto firms have factories in China and/or the US, so would have suffered from increased tariffs on imports between the two countries.

Here’s our news story on Karren Brady’s departure from Taveta:

Karren Brady resigns from Philip Green's Taveta

Newsflash: Baroness Karren Brady has resigned as chair of the company behind Sir Philip Green’s retail empire, Taveta Investments.

Non-executive director Sharon Brown is also leaving.

Here’s the statement from Taveta.

“Taveta would like to announce that Karren Brady and Sharon Brown (in their respective capacities as non-executive chairman and non-executive director) have resigned from its board. Taveta thanks them for their contribution and wishes them well for the future.

Taveta is in active discussions with individuals who have significant relevant experience and expects to make a further announcement as to the composition of its board shortly.

The board of the Taveta group’s main operating company, Arcadia Group Limited (under the chairmanship of group CEO, Ian Grabiner), and the boards of all the other trading companies within the group remain both unchanged and committed to the group’s strategy for the benefit of all stakeholders.”

Earlier this month Baroness Brady said she felt a “sense of duty” to Taveta’s staff to remain in her post, following allegations against Green published by the Daily Telegraph.

ABF: Disorderly Brexit would be irresponsible

With just 32 days to go until Brexit Day, UK businesses are becoming increasingly - and understandably - anxious.

The finance director of Associated British Foods has warned that it’s “unbelievable” that a no-deal Brexit is still on the table.

John Bason told Reuters that a hard Brexit would be ‘irresponsible’, saying:

“For it even to be contemplated - a hard Brexit where you’ve got no arrangement with your major trading partners and when we’re so reliant on them for the food supply chain - I find it unbelievable.

“The consequences of getting this wrong for people are major and I want people to understand that.

With Theresa May delaying the Meaningful Vote on Brexit, again, speculation is building this morning that the UK’s departure could be delayed.

The Telegraph is reporting that Brexit could be postponed by up to two months, while we’ve heard that EU officials could offer a delay until 2021.

Our politics liveblog is tracking all the action:

Persimmon shares slump on Help to Buy ban fears

Britain’s housebuilders are bucking the trend this morning, as they slide to the bottom of the FTSE 100 leaderboard.

Persimmon has slumped by almost 7%, after it emerged the company could lose its right to sell houses under the Help to Buy scheme.

Government insiders say housing secretary James Brokenshire is “increasingly concerned” by Persimmon’s behaviour - from complaints over quality of its homes to the row over the huge bonuses paid to CEO Jeff Fairburn.

Persimmon has boosted its profits thanks to the Help to Buy scheme (which helps new customers onto the property ladder). So if Brokenshire decides to red-card Persimmon, it could have a major impact on its bottom line.

The prospect of a government clampdown has hurt rival housebuilders; Taylor Wimpey are down 3%, with Barratt down 2.5%.

Updated

Wall Street is expected to hit a new 2019 high when trading resumes in New York in under six hours time.

Connor Campbell of SpreadEx says:

With the Asian markets surging to a 5 month high in the aftermath of Trump’s comments, the Dow Jones is set to hit its own 26100-plus, 3 and a half-month peak when it opens later this afternoon.Yet the European indices weren’t anywhere near as giddy, perhaps held back by the ongoing lack of clarity over what exactly is going to happen with Brexit.

Updated

China’s stock market has been through a wild year -- falling steadily in 2018, before surging back in 2019.

Germany’s DAX index has jumped 0.6% in early trading, as Frankfurt traders welcome the ceasefire in the trade war.

Germany’s economy hasn’t grown since last summer, with exports suffering from trade disruption, so its manufacturers will be hoping that Trump and Xi sign off an agreement soon.

Britain’s FTSE 100 index has jumped by 20 points in early trading to 7198, as the relief rally reaches Europe.

Mining group Glencore is the top riser, up 2%. Demand for its iron ore and coal reserves will rise if a trade war is averted.

Financial groups Prudential (+1.8%) and Standard Chartered (1.5%), which both have strong exposure to Asia, are close behind.

Virtually every stock on China’s CSI300 index rose today, with financial stocks and technology companies leading the sizzling rally.

Scores of stocks were suspended after jumping more than 10%, which is the largest gain allowed by Chinese regulators.

Tai Hui of J.P. Morgan Asset Management takes a cautious line, saying:

“The latest news may not offer a significant boost to start the week. Nonetheless, it helps to underpin positive investor sentiment.”

Analyst: Trump wanted to avoid harming US economy

The US-China trade war has been a big culprit behind the recent slowdown in the global economy, so there should be widespread relief that it isn’t about to get any worse.

Hussein Sayed, chief market strategist at FXTM, argues that economic and political pressures forced Donald Trump to give China more time to reach a trade deal.

He writes:

The trade dispute has been a painful one for both countries and the world, especially since it occurred when the economic cycle approached a peak. While China wants to prevent a hard landing, President Trump wants to fulfill one of his key campaign promises to correct the trade deficit. However, to support his re-election bid, Trump needs to avoid dragging down the U.S. economy and thus announce a deal, even though it might not look like a perfect one.

Equity markets in mainland China were the main beneficiaries of Trump’s announcement on extending the 1 March deadline. The blue-chip CSI 300 Index surged 4% today, hitting its highest level since June 2018; it has entered a bull market, rising more than 23% from January lows. The Chinese Yuan also strengthened 0.4%, reaching a 7-month high.

The improved appetite for risk has provided a boost for high beta currencies like the Australian and New Zealand Dollars, with both rising 0.3% during Asia trade. Elsewhere, the reaction has been muted, with the Euro, Pound and Yen moving in very tight ranges.

Turnover on the Chinese stock exchanges has been huge today, after president Trump removed the threat of raising tariffs at the end of this month.

The turnaround in the Chinese stock market this year is quite something, even before today’s surge:

The agenda: Tariff delay cheers markets

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

A fragile truce has broken out in the US-China trade war, sending investors in Asia into a share-buying flurry.

Overnight, president Donald Trump announced he was extending the deadline on increasing tariffs on $200bn of Chinese imports beyond 1st March. That removes the risk that the trade war between Washington and Beijing escalates further, dragging the world into a deeper slowdown.

So why the change of heart? According to Trump, there has been “substantial progress” between the two sides, following high-level talks between officials in recent weeks. The president also dangled the possibility that he might sign off a deal when he meets with China’s leader, Xi Jinping.

We don’t know when this Trump-Xi summit might take place. And there’s a suspicion that Trump has blinked, by kicking his own deadline down the road.

As Sue Trinh of Royal Bank of Canada puts it:

Nothing has been confirmed and we think it will be impossible for China to conform to US demands on substantive core issues. But that’s for another day.

But in the short term, relief is coursing through the markets, particularly in Asia. China’s main equities indices have surged by almost six percent, to an eight-month high.

This means China’s stock market has gained almost 20% since the start of the year, putting it officially into a Bull Market, as it recovers much of its shocking losses in 2018.

Traders are clearly hopeful that Washington and Beijing can put months of quarrelling, and tit-for-tat tariffs, behind then.

My colleague Martin Farrer explains:

China’s official Xinhua news agency echoed Trump’s comments and said the two sides “came a step closer to realising the important consensus reached” by Trump and Xi Jinping when they agreed to a trade war truce in December. The delegations agreed to “carry out follow-ups in accordance with the instructions of the two heads of state”.

The delay in tariffs was the clearest sign yet of a breakthrough the two sides have sought since calling a 90-day truce in a trade war last year. It will likely be cheered by markets as a sign of an end to the year-long dispute that has disrupted commerce worth hundreds of billions of dollars of goods and slowed global economic growth.

Other Asia-Pacific markets have also rallied, with Hong Kong’s Hang Seng index up 0.5% and Japan’s Topix gaining 0.7%.

European stocks are expected to pick up the baton, with the FTSE 100 called up 0.35%.

Otherwise, the economic calendar looks rather bare today. But we do get results from Associated British Food (which owns Primark), media group Reach, and distribution giant Bunzl.

Updated

 

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