Finally, the US stick market has closed in the red.

The S&P 500 lost 0.6%, the Dow finished 0,5% lower and the Nasdaq shed almost 1%

The trade figures haven’t brought much cheer to Wall Street today, where the Dow is down 149 points or 0.6% at 25,656.

The slightly-weaker-than-expected ADP jobs report has dampened the mood, while investors are still looking for progress on the US-China trade talks.

Marketwatch’s Paul Brandus agrees that Donald Trump has pushed up the US trade gap, by making the deficit larger.

He says Trump’s tax cut forced the US to borrow more, with predictable (and indeed predicted) consequences...

Here’s a flavour:

“If foreigners buy more government bonds (which is how the Treasury borrows money), that causes an appreciation of the exchange rate,” points out Sherman Robinson, a senior fellow at the Peterson Institute for International Economics in Washington. “This makes our exports more expensive abroad and imports cheaper to U.S. citizens.”

Which means foreigners buy fewer of our exports and we buy more of their imports. It’s that simple.

Thus the law of unintended consequences: Trump said his policies would curb both the debt and the trade deficit—but he has only made both worse.

More here.

A reminder of the key points in the US trade data:

Economist Jeoff Hall points out that December’s US-China trade gap was a record - and much, much wider than at the end of Barack Obama’s presidency.

More reaction to the US trade figures:

America’s widening trade gap is likely to drag economic growth down in 2019, predicts Andrew Hunter of Capital Economics.

He writes:

The widening in the trade deficit to a 10-year high of $59.8bn in December, from $50.3bn, confirms that net trade was a drag on GDP growth in fourth quarter, and we expect that drag to intensify in the first quarter....

Import growth is on course to pick up, but the decline in December will hold back real exports, particularly with global demand continuing to weaken. With real consumption growth also set to slow following weakness in December, the upshot is that GDP growth remains on course to slow to only around 1.5% annualised in the first quarter.

Last year Donald Trump imposed tariffs on $250bn of Chinese imports in an attempt to close the US trade gap. He also brought in levies on steel and aluminium from around the world, plus tariffs on some goods from Europe.

So the $621bn question is... why did the trade deficit get bigger?!

One key factor is that Trump also stimulated the US economy by cutting taxes, giving consumers and businesses more money to spend.

Inevitably, some of that money went on imports from abroad - especially as the US dollar has strengthened, giving Americans more purchasing power. That creates a wider trade gap.

That strong dollar also makes it harder for US companies to sell goods abroad.

Another factor: it takes time to construct factories so that goods made in China can be made in the US instead. In the short term, US companies have had to swallow tariffs on Chinese imports, rather than buy domestically instead.

Gregory Daco, chief economist at Oxford Economics, tweets that protectionism isn’t the answer.

Bloomberg’s Shawn Donnan has points out that America’s services surplus with the rest of the world grew last year (but not enough to keep up with the rising goods deficit).

CNN’s Christine Romans agrees the White House won’t be happy with these trade stats:

President Trump may regret tweeting last year that “trade wars are good, and easy to win”.

The Washington Post says today’s US trade figures show that Donald Trump’s trade policies aren’t helping the US economy.

They also point out that the trade in goods deficit (ignoring services) has hit a record high.

US posted record-breaking $891.2 billion merchandise trade deficit in 2018, despite Trump’s ‘America First’ policies

President Trump’s tariffs and tough policies have failed to shrink a trade gap that he argues represents a massive transfer of wealth from Americans to foreigners. He begins his reelection drive with a core campaign promise unfulfilled — and with a recent flurry of economic research showing that his embrace of tariffs is damaging the U.S. economy.

Newsflash: US companies created 183,000 new jobs in February, according to the ADP monthly survey of private sector employment.

That’s below the 190,000 which economists expected. It may mean that Friday’s non-farm payroll (NFP, the broader measure of US employment) will be a bit weaker than expected.

But.... January’s ADP reading has been revised HUGELY higher, from 213,000 to 300,000.

That’s effectively catches up with last month’s NFP, which smashed forecasts with a 304,000 increase in employment.

It’s been a fairly dull morning in the financial markets.

Australia’s worryingly weak growth figures dampened the mood, and the OECD’s downgrades added more gloom.

The German and French stock markets have both dipped. Britain’s FTSE 100 is up, but that’s partly due to the pound being hit by Brexit worries.

Connor Campbell of SpreadEx says:

The OECD became the latest institution to ring the Brexit alarm bells. It stated that the UK economy is expected to grow 0.8% in 2019, just shy of half the already paltry 1.4% posted last year. And that’s with a deal; without and the OECD warned the UK could plunge into a recession that would ‘generate sizeable negative spillovers on growth in other countries’.

Britain wasn’t the only nation dealt a worrying report card by the OECD. For 2019, China is now expected to see GDP of 6.2%, 0.1% lower than November’s forecasts and a significant drop from 2018’s 6.6%; the US is estimated at 2.6% against last year’s 2.8%. As for the Eurozone as a whole, the region is forecast to grow by a measly 1%, mainly due to the faltering economies of Germany and Italy.

There’s no cheer for Italy or Turkey in today’s report -- the OECD thinks their economies will shrink this year.

Here’s a full list of the OECD’s new growth forecasts, and the downgrades compared with November’s forecasts:

Here’s the key messages from the OECD today (you can see its presentation here).

The OECD’s top economist, Laurence Boone, has a sharp warning for policymakers - they needs to do more to prevent the slowdown turning into a downturn.

She says:

“The global economy is facing increasingly serious headwinds.

A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets. Governments should intensify multilateral dialogue to limit risks and coordinate policy actions to avoid a further downturn.”

Ouch! The OECD has more than halved its forecast for Germany’s growth in 2019, from 1.6% to just 0.7%.

That would be a real blow to Germany, which shrank slightly in the second half of 2018.

The OECD says it has slashed its growth forecasts due to the slowdown in Europe, and the risks from China.

It warns:

The global economy is slowing and major risks persist, with growth weakening much more than expected in Europe.

Economic prospects are now weaker in nearly all G20 countries than previously anticipated. Vulnerabilities stemming from China and the weakening European economy, combined with a slowdown in trade and global manufacturing, high policy uncertainty and risks in financial markets, could undermine strong and sustainable medium-term growth worldwide.

In the financial markets, the pound is dipping as traders fret about Brexit.

The UK’s efforts to win new concessions from Brussels over the Irish Backstop seem to be making little progress, despite deploying the Attorney General’s vocal charms this week.

This has sent sterling down 0.2% to $1.315.

Goldman Sachs employees will be chucking out their ties and high heels and ordering new t-shirts and trainers today, after the Wall Street bank tore up its dress code.

The firm is moving to a “flexible dress code”, recognising the fact that workplaces everywhere are becoming more casual.

In a company-wide memo, staff were told:

“Of course, casual dress is not appropriate every day and for every interaction and we trust you will consistently exercise good judgment in this regard.

“All of us know what is and is not appropriate for the workplace.”

Staff may be relieved to escape the tyranny of starched shirts and designer jacket-and-skirt combos. But they now face a new challenge - what exactly is ‘appropriate’ for the day’s business?

Obviously no-one wears bowler hats in the City any more, and the tech boom has created a new wave of millionaires who take dressing down to new heights. It’s not what you wear, but what you can do, right?

Even so, Goldman Sachs staff are being advised to leave the extra-tight t-shirts at home....

More here:

Adam Cole of Royal Bank of Canada also believes Australia’s central bank could be forced to cut interest rates soon:

He told clients:

Australia’s Q4 GDP rose 0.2% q/q – below consensus (0.3%) and well below the RBA’s expectation of around 0.6%.

The key domestic demand components were all weak and our economists suggest the door for rate cuts has opened further and the downside risks to their flat profile have increased.

Neil Wilson of Markets.com says Australia’s slowdown is a worrying sign:

China’s softness is a key factor and the weaker outlook for the world’s second biggest economy is a long-term drag for Australia, never mind what happens on trade with the US.

If you look at the global economic outlook, the Aussie is a proxy for that bullish sentiment and the news and date are we seeing is not terribly rosy.

These growth figures are a body blow to Australia’s centre-right government, explains my colleague Amy Remeikis:

Scott Morrison has increasingly staked the Coalition’s election chances on the economy, warning repeatedly “the economy will be weaker under Labor”. This week the prime minister again sounded the alarm that voters could see a return to 1991 recession conditions under a Shorten government.

Morrison honed his message in a speech to the Australian Financial Review Business Summit on Tuesday, shaping the election as a contest between “enterprise and envy”.

But Australian Bureau of Statistics data released on Wednesday show the economy grew by 2.3% over the year, and just 0.2% for the December quarter, short of the Reserve Bank forecast of 0.6% and market expectations.

The Australian dollar has fallen faster than England wickets on a bad day at the Gabba, hitting a four-month low.

With growth so weak in the last quarter, traders are calculating that Australia’s central bank must be more cautious. It could even cut interest rates to help the economy.

Jasper Lawler of London Capital Group says:

The Aussie dollar dropped to a 4-month low of 0.7028. The Aussie dollar could see further downside.

Even though the Reserve Bank of Australia continue to put on a brave face, the economic backdrop remains uncertain and data is tilting to the weakside, boosting speculation of a rate cut from the central bank.

Australia’s growth figures are even worse if you adjust for population changes.

On a per-capita basis, Australia’s GDP has actually shrunk for the last six months, which puts the country into a ‘per capita recession’.

That’s because the population grew by 0.4% during the quarter, while GDP only rose by 0.2%.

That doesn’t mean that recent migration is bad for the economy, of course -- quite the reverse if anything! But it may show that the underlying picture is weaker than the headline numbers show.