Rates cut to 4.5%
Trump’s trade tsar rejects Canadian proposal to rethink auto commerce rules
The address book is the last, worst default app you rely on. It’s time it got as smart as the rest of our phones. That’s the idea behind SuperPhone. Email isn’t how you build relationships anymore. Yet most business software sanctifies the spammy inbox when it’s the immediacy of text messaging that keeps people in touch today. Read More
By now you’ve probably heard that the Dell board is supposed to be convening later this month to figure out how it might reorganize itself to deal with the mountain of debt it took on when it bought EMC in 2015 for $67 billion. The rumors began on Friday and involved a couple of possible scenarios including Dell going public or Dell buying the remainder of VMware (which I’m not… Read More
Powell must balance low inflation against signs of overheating markets as he takes reins from Yellen
Readers suggest boosting provincial centres, controlling rents, greater regulation of landlords, and minimum incomes
Ann Pettifor (Journal, 27 January) identifies several important strategies for solving London’s crisis of “unreal estate”, but omits one that is vital: developing regional economies. By the standards of most European nations, Britain’s economy is incredibly concentrated in a single conurbation. Today’s online technologies should make it possible for every business with a huge London office to have regional offices all over the country.
There are plenty of provincial centres with large enough resident populations – let’s say of 250,000 people – to build a wider commuter belt around. Even counties remote from the other metropolitan areas have such population centres. Along the west coast mainline Milton Keynes and Stoke fill gaps. In the east Midlands most of the counties’ eponymous towns are now big cities. Along the south coast Sussex has Brighton, Hampshire and Dorset Southampton, and Devon and Cornwall Plymouth. Even the gap between London and Bristol now has Swindon.
Why Markets Love Trump’s Tax Cuts Put aside partisan feelings and recognize that the economy is getting a major stimulus. Bloomberg, January 29, 2018 It has barely been a month since the Tax Cuts and Jobs Act of 2017 passed. Despite a volley of criticism over the bill, Mr. Market has voted with his feet.…
US currency regains some ground after being hit by fears of trade war, while sterling hit by renewed political uncertainty
With the dollar recovering from its recent weakness, and continuing uncertainty over Brexit, the pound has come under pressure today and is currently 0.63% lower at $1.4080.
Meanwhile bonds prices are falling and yields rising, as central banks increasingly look to move away from their low interest rate and QE programmes which have supported markets for several years now. German and US yields in particular have move sharply higher.
With the recovery in the dollar, a decline in bond prices and a busy week ahead, US markets have slipped back from their record levels.
As well as the Federal Reserve’s latest interest rate setting meeting, there is the State of the Union address and a host of results from the likes of Apple, Alphabet, Facebook, Microsoft and Amazon.
Here’s our full report on the EU’s warning to Donald Trump over trade. Daniel Boffey writes:
Brussels has warned that it stands ready to retaliate and potentially open up a transatlantic trade war if the US delivers on apparent threats to restrict European imports.
The US president, Donald Trump, claimed in an interview with ITV broadcast on Sunday that the EU had been “very unfair” on American exporters, and that it would “morph into something very big” that would “turn out to be very much to [the EU’s] detriment”.
Saving down, consumption and sentiment up — another sign we are approaching the latter stages of the expansion. pic.twitter.com/LQUK10VKBW
The latest set of US inflation figures have risen in December in line with forecasts.
The personal consumption expenditures price index – it may be a mouthful but it is the Federal Reserve’s preferred measure of inflation – climbed from 0.1% in November to 0.2% last month. On an annual basis it rose 1.5%, the same as in November. It is still below the Fed’s 2% target.
Stock markets are pretty steady at the moment, but will that last if bond yields continue to climb?
“If the 10-year goes above 2.63 … it will accelerate higher and equity markets are going to be spooked and maybe that’s the cocktail that is coming our way.” – @TruthGundlach on Jan. 10.
10y yield now 2.72%. Stocks about to be spooked? pic.twitter.com/rqrhHRg0ch
Ouch! Global bond rout deepens w/ 10y US treasury yields jump >2.7%. pic.twitter.com/I3GzY4RfWE
On the weak pound, financial analyst Connor Campbell at Spreadex said:
With little else to focus on investors turned their attention to Theresa May’s most recent bout of Tory turbulence, much to the pound’s displeasure.
The Prime Minister is dealing with the umpteenth swell of dissent over the state of her leadership, while at the same time having to try and quash the latest beef between her warring ministers, this round sparked by leaked Whatsapp messages from climate change minister Claire Perry calling Brexit voters ‘swivel-eyed’.
The pound continues to slip back against the dollar, and is now down 0.66% at $1.4074.
Against the euro, sterling is down 0.32% at €1.1352. As well as the dollar’s recovery, the pound is being hit by renewed Brexit uncertainty, after the continuing splits in the Conservative party and the prime minister’s perceived weakness.
President Trump said at Davos on Friday that he wanted free and fair trade, comments which did little to assuage fears of a possible trade war.
Especially since they followed the imposition of tariffs on washing machines and solar panels from China and South Korea. Michael Hewson, chief market analyst at CMC Markets UK, said:
President Trump’s speech on Friday did nothing to increase [concerns about a trade war], but neither did they assuage them. His comments that the US wanted free but “fair” trade suggested that he would not be shy in confronting what he considered unfair trade practices, potentially putting him on a collision course with China, as well as the European Union.
The European Union stands ready to react swiftly and appropriately in case our exports are affected by any restrictive trade measures from the United States. pic.twitter.com/sdYBSWlexb
On a lighter note:
Is this the end of the battle for the sunbed? Thomas Cook is offering holidaymakers the chance to pre-book sun loungers, eliminating the need for the dawn dash to the pool to bag one with a towel.
For €25, customers will be able to book a specific sun lounger for their entire holiday. The Anglo-German company says it is the UK’s first package holiday firm to offer this service, which it is trialling at three hotels in Lanzarote, Gran Canaria and Fuerteventura from the end of February.
The FTSE 100 is currently managing to stay in positive territory, just. But European markets have slipped back after a bright early start.
The UK’s leading index is up 0.13% while Germany’s Dax has dipped 0.23% and France’s Cac is down 0.07%.
The FTSE 100 [is] gaining ground thanks to a weaker pound and a strengthening price of copper. Rising copper prices have helped boost the commodity-heavy FTSE 100, with Anglo American, Glencore, Rio Tinto, and Antofagasta helping drive the index into the green. After last week’s losses, UK traders will hope that this will represent the beginning of a resurgence for the FTSE, yet with the dollar devaluation likely to drive the pound higher yet, it makes more sense to be long US markets over their European counterparts.
Today sees a somewhat serene start to what is likely to be a fairly frantic week, with the second half providing a whole host of top tier economic data points to drive market sentiment. Donald Trump’s state of the union address tomorrow sees the market focus shift back to US economic prospects, and with the potential for a raft of infrastructure projects around the corner, there is another good reason to be long US stocks.
Here’s the Reuters report on the earlier Chinese central bank comments:
China will consider including shadow banking, property financing and internet financing in its macro-prudential assessment (MPA), central bank vice governor Yi Gang wrote on Monday, according to China Finance, a publication under the People’s Bank of China.
The world’s second-biggest economy still has problems and hidden dangers as the country’s debt levels are still high while asset bubble risks have not yet been fully contained, Yi wrote.
Back in the volatile world of cryptocurrencies, bitcoin is down 3.5% at $11,284 on fears of a further crackdown by regulators, this time in Japan.
This follows news that one exchange, Coincheck, would refund around $400m to customers after hackers stole holdings in NEM, the world’s tenth biggest cryptocurrency. NEM is currently down around 8%. Fiona Cincotta at City Index said:
This incident highlights one of the biggest concerns towards crypto currencies, namely security. The Japanese government have ordered Coincheck to beef up its security to prevent a repeat incident, as more authorities are clamping down on the virtual currency. Given the headline grabbing numbers, this hack is unlikely to disappear into headline history fast. Japan is one of the largest markets for cryptocurrency trading, accounting for around 30% -40% of global traded volume last month. Should this hack seriously dent confidence in virtual currencies, Bitcoin could see the selloff extended.
Bond prices are coming under pressure on the growing signs that central banks are moving away from their low interest rate and QE programmes.
With the US economy growing at 2.6% in the final quarter and the Bank of Japan governor saying inflation was close to reaching its target, US Treasury bonds fell and the yield [or interest rate] rose.
US 10s [ten year bond yields] just hit 2.71%, while German bund yields are also on the march higher with the 5-year turning positive for the first time since 2015. It does look like this is capitulation time for bond bulls as yields are entering breakout mode, which will have important consequences for equity valuations. At this stage in the cycle it makes sense for yields to be climbing but breakout beyond the 30-year trend line does signal the bond bears are here at last. A spike to 3% in the 10-year now looks very possible and a bond market rout could spook the market.
China’s central bank says it will keep a prudent and neutral monetary policy, but admits the country’s economy still has problems, including high debt levels and the risks of an asset bubble.
It added in its latest bulletin that it had the right conditions to keep the renminbi basically stable, and said a two way fluctuation in yuan rates would become the norm.
Julian Dunkerton, the co-founder of Superdry, is nearly £18m richer after selling part of his stake in the fashion retailer.
Dunkerton, which is now the company’s product and brand director, sold one million shares at the end of last week at £17.80 each. That amounts to 1.23% of the company and still leaves him with more than 25%, making him its largest shareholder.
More on the collapse of construction group Carillion. Julia Kollewe reports:
Accountancy firm KPMG is to be investigated by the UK’s Financial Reporting Council over its role in the collapse of Carillion.
The business secretary, Greg Clark, welcomed the investigation, which the accounting watchdog said followed inquiries made since Carillion’s shock profit warning in July. The FRC said it would conduct the investigation, which will cover 2014 to 2016, and additional audit work carried out during 2017, “ as quickly and thoroughly as possible”.
As expected, most European markets have opened in positive territory – just about – helped by the weakness of the pound and euro against the dollar. A weaker currency gives a boost to exporters, with the FTSE 100 in particular packed with overseas earners.
The UK’s leading index is up 0.14%, also benefiting from positive performances by mining groups after a 1% rise in the copper price. But drinks group Diageo, one of those which might be expected to benefit from a weaker pound, is down nearly 1% after a downgrade by analysts at RBC.
Despite the prospect of further US interest rate rises this year, ING Bank believes the dollar weakness is likely to continue (notwithstanding today’s move higher.)
Apart from the US inflation data later and the two day Federal Reserve meeting which starts tomorrow, there is another big event which could have a major impact on the curreny. ING foreign exchange strategist Viraj Patel says:
In an action-packed week for global markets, the main event will be President Trump’s State of the Union address (Tueday 2100 ET) – which is set to outline the administration’s 2018 policy agenda ahead of the pivotal November midterms. With US trade policy in particular focus, the burning question for investors is which type of Donald Trump will turn up: Dr Jekyll or Mr Hyde?
While the former manifestation may have appealed to the international elite at Davos, we would not be entirely surprised to see the more fiery characteristics of the President surface back on home soil in Washington. Indeed, with President Trump fighting low approval ratings, fresh allegations that he wanted to fire Special Counsel Robert Mueller last year and with little policy progress to show (beyond the Tax Bill) – there’s every chance that the ‘America First’ policy talk has a protectionist sting in the tail this week. As such, we expect global risk sentiment to remain on red alert ahead of the speech – with outside risks that USD/JPY could fall to the 107.00 level on a more contentious Trump State of the Union address.
The weaker pound and euro are expected to give some support to stock markets when they open.:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The dollar has been under pressure for some time now, and is set for its worst start to a year for around 30 years. Conversely US stock markets are making their best start for the same period, partly due to that very dollar weakness.
Investors will now look ahead to the release of US PCE [personal consumption expenditure] figures, the Fed’s preferred measure of inflation. Month on month inflation is expected to have increased 0.2% in December, from 0.1%. Meanwhile, on a annualised basis a constant reading of 1.5% is forecast. Given the ongoing concerns at the Fed over the sluggish inflation in the US, a higher reading this afternoon, could help cement the dollar’s bounce.
Another startup in the area of cyber security has been snapped up as platform businesses serving enterprises look for more ways of securing their own networks and working with customers to secure theirs. Today, the RELX Group (formerly known as Reed Elsevier) announced that it would acquire ThreatMetrix for £580 million (about $817 million) in cash. This is a big exit for ThreatMetrix, which… Read More