Finally, December has begun badly on Wall Street, with losses triggered by Donald Trump’s tariffs on Brazil and Argentina.

Today’s drama could be a good buying opportunity for those not invested in Brazil (but will only make a bad situation worse in Argentina).

So argues Kim Catechis, the Head of Investment Strategy at asset manager Martin Currie.

Here’s the theory:

Brazil is in a good place right now, with the economy coming out of the deepest recession in history and interest rates and inflation at their lowest levels. Brazil exported around $2bn of steel to the U.S. in the first 10 months of 2019, equivalent to around 9% of total exports to the U.S. For Brazil, exports to the USA are 12.47% of total exports (source: WITS (WTO)) and far behind China’s 22% of exports.

Meanwhile, Brazil imports around $25bn of goods from the U.S., which could potentially become subject to retaliatory tariffs, around half of these imports are of refined oil products. The next biggest category of imports is integrated circuits, which come from the U.S. chip manufacturers. In 2018, there were $6bn of aircraft exports. The Brazilian-made Embraer regional jet is widely used in U.S. airlines – part of the reason that Boeing has signed a strategic partnership with Embraer. For investors in Brazil, this is a sideshow unless the tariffs spread to other categories besides aluminium and steel.

For many Brazilians, this smells like revenge for their country’s soybean farmers bonanza – they have benefitted enormously from the U.S.-China trade war by replacing U.S. soybeans sales into China.”

Some context. Despite today’s falls, the UK’s blue-chip FTSE 100 index is still up over 8% this year.

And here’s the damage across Europe today. Not a crash, of course, but certainly a poor day.

Wall Street is also firmly in the red.

The Dow Jones industrial average is currently down by 235 points or 0.8%, as the clocks strike noon in New York.

Donald Trump has spooked the markets once again with his latest flurry of tariffs, says Connor Campbell of SpreadEx.

Oh Donald, Donald, Donald. With the markets having done their best to maintain a positive outlook on the US-China situation, despite Hong Kong becoming a political pawn between the two sides, Trump went and added another couple of enemies to his trade war portfolio.

Delivering the news via, where else, Twitter, the President said that ‘effective immediately’ he would be restoring tariffs on all steel and aluminium imports from Brazil and Argentina. This as Trump claimed those countries had been ‘presiding over a massive devaluation of their currencies’ that was ‘not good’ for American farmers. Never missing a chance to attack Jerome Powell at the Federal Reserve, he ended the announcement by haranguing the central bank about lowering rates and loosening monetary policy to weaken the dollar.

European markets are also sliding in late trading, as trade jitters hit stocks.

The FTSE 100 is down 68 points, or nearly 1%, with heavier losses in other markets....

Uh-oh...

Donald Trump’s secretary of commerce, Wilbur Ross, has warned that America would impose fresh tariffs on China if a trade deal isn’t agree.

He was speaking on Fox News a little while ago.

This is a change of tone from the White House -- recently, officials have been talking up the prospects of a Phase One trade deal soon.

This has knocked Wall Street, where the S&P 500 is down 0.8% so far today.

Q: You say will make climate change one of the priorities of the ECB... do you have full support of that plan? How will you persuade counterparts at other central banks who think fighting the climate crisis is a fiscal issue? And what specific measures will you propose?

Christine Lagarde says there are several ways of “greening” the ECB’s work - including adding a climate crisis focus to its analytical work, the risk assessment it carries out, and its own pension fund management.

We are active in various forums, she continues. And the new strategic review will consider the ECB’s activity in those forums, such as the G20.

Lagarde then denies that the ECB is making the climate crisis worse via its bond-buying stimulus programme.

She argues that by improving financial conditions in the eurozone, the ECB is helping companies to fund new, greener projects.

Back in Brussels, Christine Lagarde is being challenged about her commitment to the climate emergency.

“Clear, precise and rapid actions” are needed, one MEP points out, so what action will the ECB actually take?

And isn’t the ECB actually fuelling the climate crisis, by buying the debt of energy firms such as Shell and Total through its bond-buying stimulus scheme?

Q: How can we finance investments to get rid of dirty, brown investments on the other side, and get the ECB out of carbon assets?

In response, Lagarde agrees that the ECB’s bond portfolio contains “multiple shades from green to brown”. That’s due to the policy of ‘market neutrality’, which means the Bank cannot use its stimulus programme to support green policies.

Should this policy be revised? How? That will be part of the review that we need to conduct, Lagarde says.

Some critics have argued that this market neutrality policy is hampering the fight against the climate crisis, as it means the ECB must buy bonds issued by heavy polluters as part of its QE programme.

Lagarde also reiterates that the ECB needs to “embed climate change imperatives” in its work, including its economic forecasting.

Christine Lagarde is urged the European Parliament to help tackle the gender imbalance on the ECB’s governing council, during her testimony in Brussels.

Currently, Lagarde is the only woman on the 25-strong governing council, as its chair.

She points out that 19 of those members are male - the 19 central bank governors for each eurozone country.

You could push the authorities to start appointing female central bankers -- I’ve got some names if it would help -- Lagarde tells the Committee on Economic and Monetary Affairs.

She adds that she would not like to be alone as the only woman on the Council for too long.

Shares in US steel makers are up in pre-market trading, as they should benefit from tariffs on foreign rivals.

However, rising prices are going to hurt US companies who actually buy steel and aluminium.

European stock markets have dropped into the red since Trump’s tweets hit the wires, erasing their earlier gains.

The German DAX is leading the selloff, down 0.7%, while the UK’s FTSE 100 has lost 0.3% or 24 points.

Earlier optimism, following better-than-expected Chinese factory data, has been replaced with trade war anxiety.

Shares in Brazilian steel-makers are falling as trading gets underway in São Paulo.

São Paulo-based Gerdau are the biggest faller, down 1.5%, followed by Usiminas, which dropped over 1%. Both companies run major steel mills in Brazil, and could suffer once new tariffs are imposed at the US border.

Argentina’s government is also planning to negotiate with the US government, a spokesperson says.

Brazil’s President Jair Bolsonaro has responded.

Bolsonaro says he could speak directly with President Donald Trump about the decision to restore tariffs on steel and aluminium imports from Brazil and Argentina, Reuters reports.

Bolsonaro added that he will discuss Trump’s declaration with Economy Minister Paulo Guedes (whose comments about Brazil’s currency being free to float may have contributed to Trump’s decision....).

This decision is also a blow to Jair Bolsonaro, Brazil’s right-wing president.

He won power last year with a campaign based on popularism, conservative policies and divisive attacks on minority groups, pushed heavily through social media.

Trump and Bolsonaro had appeared to be close allies, but this hasn’t provided protection from today’s tariffs.

Donald Trump has clearly been riled by the slump in the Brazilian real and the Argentinian peso.

The real hit a record low last week, at more than 4.25 to the dollar. Interest rate cuts, and weak economic data, had pulled the real down in recent months. But its latest tumble came after Economy Minister Paulo Guedes said he wasn’t concerned about the exchange rate.

Guedes told reporters:

“We have a floating currency, so it floats.” .

Or sinks, perhaps....

The Argentinian peso hit its own record lows earlier this year, slumping 30% after the left-wing opposition surprisingly won a presidential primary, ahead of their return to power five weeks ago.

It would be a mistake, though, to assume either country is jubilant about a weak currency. Both Argentina and Brazil’s central banks have intervened in the markets, selling US dollars to prop up their ailing currencies.

Donald Trump has also defended his trade war in a further tweet, which calls for a double fact-check!

1) Stocks are indeed higher, but that’s not due to the trade war. The S&P 500 index has gained 18% since March 2018, with the Dow up 14% and the Nasdaq gaining 21%. But America’s various ongoing trade disputes have, if anything, dampened investor optimism. Instead, US interest rate cuts, Trump’s tax reforms, and share buybacks have all played a more important role.

2) Tariffs are paid by US companies when they import goods. They either pass them onto consumers (higher prices), absorb the cost (lower profits), or try to make their supplier pick up the tab (by insisting on paying less).

In practice, all three things happen - but only the last one helps the US economy.

Brazil is the third-largest exporter of steel to America, points out Bloomberg’s Michael McDonough, so these tariffs could have an impact.

President Trump’s decision is a blow to both Argentina and Brazil, who had previously persuaded the White House not to impose metal tariffs.

Back in May 2018, both countries secured “permanent exemptions” from the levies, which are 25% on steel and 10% on aluminium.

Those tariffs were meant to protect American steel and aluminium factories from overseas competition, especially from countries which Trump accused of weakening their currencies to get an unfair advantage.

Back in the markets, the pound is dipping today as general election jitters set in.

Sterling has lost a third of a cent to $1.2895, after several opinion polls showed the Conservative Party’s lead over Labour has narrowed.

As usual, each polling company has a different picture, but the broad trend is clear.

The Daily Mirror has the details:

Opinium said the gap had narrowed from 19 points to 15, with the Tories on 46% while Labour racked up 31%.

YouGov said its gap was down from 11 to 9 points, with the Tories receiving 43% of the vote compared to 34% for Labour.

And the Tory lead more than halved according to BMG, which claimed a 13-point gap had been cut to just six points in a week.

Sam Tombs of Pantheon Economics says destocking following the latest Brexit extension is hurting factories:

The weakness in Britain’s factories in November suggests that growth may be modest in the current quarter, having barely grown in the last six months.

The CBI, which represents UK businesses, has warned that any recovery must be based on continuing to trade as freely as possible with Europe.

My colleague Phillip Imman explains:

Britain’s stuttering economy is likely to pick up momentum over the next two years, but only if the government maintains tariff-free trade with the EU, the CBI said in its outlook for 2020.

According to the business lobby group’s latest economic forecast, GDP growth for over the next two years is set to remain at 1.2% in 2020 before picking up to 1.8% in 2021.

The modest rebound depends on the next government negotiating an “ambitious trade deal” with the EU that preserves much of the current arrangements and eliminates Brexit uncertainty, it said.

Rain Newton-Smith, the CBI’s chief economist, said the forecast was based on the UK quitting the EU in two months on 31 January. The CBI’s outlook also assumed the government would provide “a clear line of sight to an ambitious trade deal,” by next summer.

The UK PMI report also shows that factories making expensive, heavy-duty goods suffered particularly badly in November.

Consumer goods makers did better, though -- perhaps benefitting from Christmas demand?

Markit says:

Investment goods producers remained severe, with production, new orders, new export business and employment all contracting at steeper rates than the other sub-industries. Output, new business and staffing levels at intermediate goods producers also fell.

There were brighter signs from the consumer goods sector, which saw growth of both output and new orders.

A triple-whammy of problems have hurt Britain’s factory sector, says Andrew Symms, partner at legal firm DWF:

“The UK manufacturing PMI figures illustrate the impact of global trade tensions, Brexit uncertainty and an impending General Election that has resulted in the PMI to 48.9 in November from 49.6.”

“The underlying data does not paint a rosy picture. Manufacturing production fell and new order inflows deteriorated from both domestic and overseas sources. Employment also fell for the eighth straight month in November. A lack of transparency caused by Brexit ambiguity is holding back investment. Manufacturers need to take positive steps to understand their supply chains, mitigate risks and ensure, to the best of their ability, that financing is available in case conditions deteriorate further.”

Britain’s factories are also suffering from some Brexit-unwinding, as companies run down stocks built up ahead of the October 31 deadline.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, says this caused a drop in orders, leading to job losses last month:

“A heavy sense of inevitability hung around the sector in November as it continued to suffer the effects of a lethal cocktail of Brexit uncertainty, slowing global growth and an impending General Election. These combined to stifle any chance of manufacturing crawling out of the contraction zone, where the sector was stuck for a seventh month in a row.

“Supply chain managers cited weakened domestic demand and one of the biggest falls in export orders for seven years as companies unravelled their pre-Brexit stocks and resulting in one of steepest reductions in purchasing since 2013. Inevitably, where new orders fall, jobs are sure to follow and manufacturing employment fell at its fastest pace since September 2012. Firms tried to balance their books by reducing overheads and improving efficiencies quickly, and staff numbers were the casualties.

“With this backdrop of pressures, the sector’s performance is unlikely to change any time soon, which means a bleak beginning for the industry in 2020.”

Rob Dobson, Director at IHS Markit, says next week’s general election is hurting Britain’s factories.

With orders dropping, and exports down too, firms are being forced to cut jobs to protect their finances, he warns.

Here’s his take on today’s survey of UK purchasing managers:

“November saw UK manufacturers squeezed between a rock and hard place, as the uncertainty created by a further delay to Brexit was accompanied by growing paralysis ahead of the forthcoming general election. Downturns in output and new orders continued amid a renewed contraction in exports. The pace of job losses also hit a seven-year high as firms sought to reduce overheads in the face of falling sales.

Destocking at manufacturers and their clients following the latest Brexit delay was a major contributor to the weakness experienced by the sector. Inflationary pressures meanwhile showed signs of moderating further, with input costs falling slightly for the first time since March 2016.

Kit Juckes of Societe Generale reports that investors are cheered by today’s Chinese factory upturn, although other PMI data has been less upbeat.

The first Monday of the month sees a feast of manufacturing PMI data around the world and this morning the overall impression, with some exceptions, is slightly upbeat.

An Japan’s came in at 48.9, up from 48.4, India’s at 5.1 vs 50.6, and China’s Caixin PMI came in at 51.8 vs 51.7. Russia was the most striking disappointment at 45.6 vs 47./2, but we saw a soft number for Sweden at 45.4 vs 46 last, too. Markets haven’t looked beyond the Chinese data too much...

Some reaction to the eurozone PMIs, from trading platform BP Prime:

Back to the PMIs. Earlier, Markit reported that Australia’s factories suffered a sharp tumble in new orders last month:

Manufacturers in Thailand and Indonesia also found November tough:

But South Korea, whose tech sector is particularly exposed to the US-China trade war, picked up last month - with its PMI rising to a seven-month high.

Also in the City, shares in fashion chain Ted Baker have slumped to a 10-year low after it warned it has overstated the value of its inventory on its balance sheet.

In a statement to shareholders, it says:

Based on preliminary analysis, the Board estimates an impact on value of £20m to £25m. The Board believes that any adjustment to inventory value will have no cash impact and will relate to prior years.

An independent review is underway. This has knocked 10% off its share price, to 357p, the lowest since 2009.

It’s the latest in a series of blows to the company, whose founder Ray Kelvin resigned earlier this year after allegations of improper conduct.

Shares in mining companies are rallying, on hopes that Chinese factories will be buying more iron ore, copper and coal.

Rio Tinto (+2.5%), Glencore and BHP Billiton (both 1.8%) have jumped to the top of the FTSE 100 leaderboard in London. That’s lifted the Footsie by 44 points, or 0.6%, in early trading.

China’s improved PMI surveys have “given the world a boost”, says Jim Reid of Deutsche Bank.

Asia-Pacific stock markets have been lifted by the rise in Chinese factory growth.

The main indices are mainly higher today, with Shanghai’s CSI 300 up 0.2%.