Article 4F2SZ Wall Street rallies as Trump promises China trade deal 'when the time is right' -as it happened

Wall Street rallies as Trump promises China trade deal 'when the time is right' -as it happened

by
Graeme Wearden
from Economics | The Guardian on (#4F2SZ)

Rolling coverage of the latest economic and financial news, including the latest developments in the US-China trade row

9.12pm BST

Finally....Wall Street has bounced back from Meltdown Monday with a Turnaround Tuesday.

8.54pm BST

Apple is particularly vulnerable to an escalating US-China trade war, analysts say.

Mobile phones made in China aren't currently subject to the new US tariffs, but they are on the list of $300bn of imports which could soon be hit.

"Apple has one of the most significant exposures to Chinese exports to the US in our IT Hardware coverage group, given final assembly for many of its consumer electronic devices is located in China."

8.08pm BST

With an hour's trading to go, the Dow is up 310 points at 25,635 points.

That would be its best day since the start of April.

8.06pm BST

After being shunned yesterday, technology shares are back in investors' good books.

IBM has gained 2%, Apple is 1.8% higher and Cisco is up 1.7% in late trading..

"We're seeing trade optimism from semi-market friendly tweets from Trump. If we're still talking then it means that a deal could be done soon.

"We're in a highly uncertain period right now, and the market is going to oscillate between good and bad days."

7.52pm BST

Wall Street traders are also taking comfort from reassuring comments from China's government today.

While many Americans were sleeping, Chinese Foreign Ministry spokesman Geng Shuang told reporters in Beijing that negotiations hadn't broken down.

"My understanding is that China and the United States have agreed to continue pursuing relevant discussions. As for how they are pursued, I think that hinges upon further consultations between the two sides,"

7.12pm BST

What goes down, must come up again!

Investors are looking for opportunities to get into this market, and so far in 2019 there really haven't been any 'buy the dip' opportunities other than last week.

And you're also seeing President Trump confirmed a meeting with President Xi during next month's G-20 summit, which provides some optimism that despite the increase in tariffs, negotiations are still ongoing."

5.28pm BST

Ironically, today's calmer financial markets mean there's more chance the trade war continues.

It might take a major crash for both sides to end the dispute, argues Stefan Legge of the University of St Gallen.

5.00pm BST

Britain's FTSE 100 index has closed 77 points higher at 7241, up 1%.

4.56pm BST

Donald Trump has downgraded the trade war to a 'little squabble'.

Speaking to the press in Washington, the president also predicts that the dispute will end extremely well.

Despite trade war with China, Pres says he has a good relationship with China's Pres Xi. Says US is in a good position in the trade dispute. Speaking to reporters on leaving the WH for Louisiana daytrip, he says the US economy is fantastic, and China's is not so good.

Pres refers to US trade war with China as "a little squabble." Says it should have been resolved by his predecessors. But still thinks "it will turn out extremely well," because the US is in a strong position." pic.twitter.com/Ucrmrja5nJ

3.36pm BST

Back on Wall Street, every sector of the Dow Jones industrial average is up.

3.19pm BST

Britain's second largest steel firm has asked the government for emergency funding to prevent it from collapse, blaming "Brexit-related issues".

British Steel, which employs 4,500 people at its Scunthorpe steelworks and several sister sites, is understood to be in talks with its lenders and the government over a 75m rescue package.

"As we have previously commented, the uncertainties around Brexit are posing challenges for all businesses including British Steel, and we are holding constructive discussions with our stakeholders on how to navigate them.

BEIS refusing to comment on British Steel asking for government to stump up cash as part of a 75m rescue package, saying it's just speculation.

Meanwhile British Steel says "discussions are continuing about a package of additional support".

3.03pm BST

Ken Odeluga, analyst at City Index, doesn't believe today's rally marks the end of the trade war jitters.

He says:

Volatile gyrations require markets to go up as well as down; Tuesday brings the upswing.

Nobody believes tariff turmoil is done; it would be difficult to do so given Washington's signal that a further barrage of new 25% duties on $300bn of Chinese goods is in the works.

2.54pm BST

Commodity prices are also rebounding a little. Soybean price are up almost 2% from yesterday's 10-year lows.

2.36pm BST

Ding ding! Shares are rising at the start of trading in New York, but it's not a very strong rally.

2.25pm BST

Bloomberg have spotted a distinct change of tone in the Chinese media recently - towards more nationalistic rhetoric.

That could be a sign that Beijing wants to ensure the public back their leaders on this issue, and blame Donald Trump for the trade war. If so, that could mean they expect it to rumble on for a while.

Important story. After being very quiet on the issue for a long time, suddenly Chinese media is loudly taking a nationalist tone on trade issues https://t.co/Sgl56r3bgj pic.twitter.com/naM5it1KbL

1.57pm BST

Donald Trump simply can't tear himself away from Twitter today.

The president has now predicted that the People's Bank of China will cut interest rates to stimulate its economy, to cope with trade war damage, and challenged the US Federal Reserve to do the same.

China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a "match," it would be game over, we win! In any event, China wants a deal!

1.47pm BST

A record number of investors are bracing themselves for a stock market crash.

Bank of America's latest survey of market players found that a third of fund managers have hedged themselves against sharp falls in asset values in the next few months. More investors are also keeping money safe as cash, rather than investing in equities or bonds.

1.21pm BST

After yesterday's heavy losses, global stock markets are turning more positive - as Donald Trump's latest tweets calm the mood.

The main European share indices are all positive today, and Wall Street is also expected to open high (after its worst falls in months yesterday).

12.38pm BST

Donald Trump has now tweeted that a trade deal with China will be struck, "when the time is right".

In another early morning burst of tweets, the president cites his "friendship" with Xi Jinping - perhaps a hint of a deal at next month's G20 leaders' meeting?

When the time is right we will make a deal with China. My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn't make any sense. We have to be allowed to make up some.....

....of the tremendous ground we have lost to China on Trade since the ridiculous one sided formation of the WTO. It will all happen, and much faster than people think!

Our great Patriot Farmers will be one of the biggest beneficiaries of what is happening now. Hopefully China will do us the honor of continuing to buy our great farm product, the best, but if not your Country will be making up the difference based on a very high China buy......

....This money will come from the massive Tariffs being paid to the United States for allowing China, and others, to do business with us. The Farmers have been "forgotten" for many years. Their time is now!

12.17pm BST

Newsflash: Donald Trump has launched a new Twitter onslaught, accusing nations such as China of treating the US as a 'piggy bank' .

The president also claims that his tariffs have helped US steel industry to boom (output is up a healthy 7% this year).

In one year Tariffs have rebuilt our Steel Industry - it is booming! We placed a 25% Tariff on "dumped" steel from China & other countries, and we now have a big and growing industry. We had to save Steel for our defense and auto industries, both of which are coming back strong!

China buys MUCH less from us than we buy from them, by almost 500 Billion Dollars, so we are in a fantastic position. Make your product at home in the USA and there is no Tariff. You can also buy from a non-Tariffed country instead of China. Many companies are leaving China.....

....so that they will be more competitive for USA buyers. We are now a much bigger economy than China, and have substantially increased in size since the great 2016 Election. We are the "piggy bank" that everyone wants to raid and take advantage of. NO MORE!

We can make a deal with China tomorrow, before their companies start leaving so as not to lose USA business, but the last time we were close they wanted to renegotiate the deal. No way! We are in a much better position now than any deal we could have made. Will be taking in.....

Billions of Dollars, and moving jobs back to the USA where they belong. Other countries are already negotiating with us because they don't want this to happen to them. They must be a part of USA action. This should have been done by our leaders many years ago. Enjoy!

12.17pm BST

Donald Trump's claim that America's steel industry is booming thank to his tariffs has been fact-checked, and found wanting.

Here's Lydia DePillis of CNN:

Morning Trump tweet fact checking time! First of all, neither the auto nor the defense industries were asking to be saved from foreign steel. Defense manufacturers already buy most of their steel domestically and the tariffs just allowed US producers to raise prices. https://t.co/UxghnVvCkR

On the big and growing steel industry thing -- here's what that looks like. On an index basis, we're all the way back to where we were in 2012. https://t.co/RftwC27HLK pic.twitter.com/IExRvvTUae

U.S. Steel Producers, Percent Change Since U.S. Presidential Election vs. the S&P 500 (pink line) pic.twitter.com/UqikihS08v

11.55am BST

Today's jobs reports suggests Britain's economy is unaffected by the US-China trade war...but the same can't be said of Germany.

German economic confidence has fallen sharply, according to the monthly survey survey from the ZEW institute.

"Financial market experts continue to expect restrained economic growth for the coming six months.

"The latest escalation in the trade conflict between the United States and China has once again increased uncertainty about German exports, and thereby a central factor for GDP growth.

After seven months of decline, ZEW current conditions improved marginally in May. However, level still poins to a slight contraction in economic activity. Economic outlook weakened a bit. No sign yet of a clear turnaround in the German economy #macrobond pic.twitter.com/lPznhp3EGl

11.40am BST

The big picture is that Britain's economy has created more jobs than expected over the last few years....but pay growth has lagged behind.

Brexit minister James Cleverly understandably highlights the first part:

As this graph shows, job growth has consistently exceeded projections.

The next tasks are to keep wage growth ahead of inflation, make sure that jobs are stable, and that they are the kind of jobs that people and society value.

A job is good, a good job is better. pic.twitter.com/5ZQRpgWO9a

Nominal pay growth has tailed off slightly (3.3 per cent in the three months to March 2019, down from 3.4 percent) suggesting that wage pressure is, if anything, falling, and that real wage growth is now being supported by below-target inflation. pic.twitter.com/LL3Gm5laDg

The public-private sector split on pay growth continues. There was lower pay growth in the public sector, while pay growth in the private sector held steady. pic.twitter.com/eS8hdPztB7

The big picture is that 11 years on from the financial crisis, we are still earning 8 a week less (in real terms) than we did in 2008. pic.twitter.com/XDmjHwJ9om

11.24am BST

Here's the full story:

Related: UK wage growth stalls despite record employment

11.23am BST

Disappointing news: Britain's economy has become even less productive.

Labour productivity - effectively the amount of output we produce -- fell by 0.2% in the last three months, the third consecutive quarterly fall.

Major downside of strong UK job growth is persistently weak labour productivity. Output per hour down 0.2% in q1 compared with previous year, third consecutive decline. https://t.co/BDri9lLIXP pic.twitter.com/ZoSuE65x9A

"With business investment also falling and wages still lower than a decade ago, we have an economy in a state of neglect, damaged by years of Tory mismanagement.

This Government is falling apart, but it must not bring the economy down with it."

11.22am BST

The Young Women's Trust has also warned that young people, particularly those with children, face a tough task in the current economic climate:

Communications and campaigns director Joe Levenson says:

"Today's data shows a fall in young women's unemployment and economic inactivity, which is welcome news.

"Wage growth, however, has slowed and we remain concerned about young people getting stuck on low pay.

11.10am BST

The news that Britain's unemployment rate is the lowest since Harold Wilson ran the country won't cheer the four million people who are trapped in poverty, despite working.

The classic relationship between unemployment and wages (when one goes down, the other goes up) seems to have broken down badly, especially for those struggling the most.

Even with tax credits and child benefit topping up her meagre wages, it was a constant struggle to pay for the essentials and Gemma fell behind on her bills. She was already receiving letters, phone calls, texts and emails threatening legal action over previous unpaid bills, as well as 400 of benefit overpayments that had to be repaid.

Her son's birthday was an added pressure but, she says with a weak smile: "I always seem to pull it out of the bag somehow." Having scraped through the month, she then put whatever she could afford - usually about 20 - towards her debts.

Related: 'You can't really win': 4m Britons in poverty despite having jobs

10.58am BST

TUC General Secretary Frances O'Grady is concerned that wage growth slowed last month (to just 1.3%, including bonuses, after inflation).

She says:

"Pay growth is stalling again. The last thing workers need is another hit in the pocket when real wages are still lower than a decade ago.

"The government must raise the minimum wage to 10 as quickly as possible. And give unions the freedom to enter every workplace to negotiate fair pay rises."

10.56am BST

Today's jobs report also shows how the rise in women's retirement age is keeping hundreds of thousands of people working longer.

The ONS reports that the number of women classed as economically inactive has fallen sharply since 2014.

This reflects ongoing changes to the State Pension age, resulting in fewer women retiring between the ages of 60 and 65 years, as well as more women in younger age groups participating in the labour market.

Related: Rise in women's state pension age prompts poverty concerns

10.24am BST

Today's jobs report also shows that EU (excluding UK) and non-EU nationals took almost half of the new jobs created in the UK in the last year.

Here's the details:

"It is easy to see why employers have turned to non-EU workers in relatively large numbers against the backdrop of a tightening labour market. What's more, contrary to some recent reports, virtually all of the employment growth during the past year has come from skilled, permanent, full-time jobs. This has allowed employers to largely overcome the restrictions they encounter when recruiting non-EU workers that do not currently apply to EU workers.

Non-EU workers are therefore playing a key, complementary role in the UK workforce; especially in sectors such as healthcare. Looking ahead, the data may herald a structural shift towards hiring more non-EU workers when restrictions are loosened for non-EU workers and tightened for EU workers from 2021."

"The relatively sharp growth in the number of non-UK born workers in employment has also acted as a brake on salaries rising more quickly; especially in shortage occupations. This will come as a relief to employers who have been subjected to increasing pressure from workers to raise pay without accompanying productivity growth.

10.15am BST

The proportion of UK adults classed as economically inactive (not in work or seeking employment) has dropped to 20.8%, close to a record low.

This is down to a drop in students, reports economist Rupert Seggins.

Number of people not in work & not looking for work (termed: "inactive") was 69k lower than in 2018 Q1. Mainly down to fewer students. Building on a point from @billwells_1 last month, note that numbers of LT sick & "other" (poss. link to Univ. Credit rollout) have been rising. pic.twitter.com/SbXq1SCgml

10.07am BST

There are now 32.70 million people in employment, 354,000 more than a year ago.

That helped push the employment rate to a joint record-high of 76.1%, impressive given the uncertainty over Britain's exit from the EU.

The continued strength of employment in the first quarter of 2019 probably reflects heightened economic activity as firms brought forward purchases and output in preparation for a possible no-deal Brexit. Now that risk has passed, activity and employment growth are likely to soften.

9.58am BST

Employment minister Alok Sharma has hailed today's drop in unemployment to just 3.8%, but also warned that workers need to improve their skills.

Sharma says:

"Rising wages and booming higher-skilled employment means better prospects for thousands of families, and with youth unemployment halving since 2010, we are creating opportunities for all generations.

"We now need to shift some of our focus to up-skilling people and supporting them into roles with real career progression to create a modern workforce fit for the challenges of the 21st Century."

9.57am BST

This chart shows how wage growth weakened a little last month, particularly for those lucky enough to get a bonus (their earnings growth fell from 3.5% to 3.2%):

9.50am BST

At first glance, today's drop in unemployment suggests Britain's economy is shrugging off Brexit uncertainty and marching onwards.

But actually, some firms are hiring rather than investing in expensive new machinery. Why? Because it's cheaper and easier to lay off staff if a no-deal Brexit suddenly blows a hole in your supply chain, or leaves you struggling to export.

The murky outlook is leading businesses to hire now with the option to fire later rather than make irreversible investments in new kit. Perhaps it is still too soon to get ahead of ourselves, though - a week before new inflation data, there's a question mark over how real the earnings growth is.

Rising wages are bound in due course to feed through into wider price rises.

9.43am BST

The women's unemployment rate has hit a new all-time low, at 3.7%, down from 3.8%. That's the lowest since records began in 1971.

For men, the jobless rate has dropped to 3.9% from 4.1%.

9.38am BST

NEWSFLASH: Britain's unemployment rate has hit a new 44-year low.... but wage growth is slowing too.

The UK jobless rate fell to 3.8% in the three-months to March, according to the Office for National Statistics latest assessment.

UK labour market continues to tighten with the unemployment rate down to 3.8% in the 3 months to March 2019, lowest since the end of 1974. pic.twitter.com/9a4oOtFYE7

9.32am BST

The vegan sausage roll truly is the gift that keeps on giving.

9.25am BST

In the City, mobile operator Vodafone has hit its shareholders with a stinging dividend cut.

The operator has engaged in several initiatives to contain cost and secure new revenue streams, including redefined convergence approach for increased customer engagement, 5G investments aiming for further cost efficiencies and new revenue streams, and digital transformation focusing on big data, AI and RPA which already achieved some cost savings. In addition to that, improved asset utilization strategy with extended network sharing agreements (4G/5G) in the UK, Spain and Italy and the creation of a virtual TowerCo was part of the strategy adopted to contain costs.

However, the burden of hefty price tags for 5G-suitable spectrum in the UK, Italy and Germany weighed in.

9.05am BST

China is keeping tight-lipped about the suggestion it could stop buying US government debt, as part of a trade war retaliation.

China Has Declined To Comment On Media Reports Regarding US Treasury Holdings

8.47am BST

China's foreign ministry is holding a briefing with journalists in Beijing now, and taking a tough line on trade.

Foreign ministry spokesman Geng Shuan says China hopes that the US doesn't underestimate its determination to protect its interests. That's the diplomatic equivalent of a sabre-rattle in the general direction of Washington.

Reuters: #China's foreign ministry says hopes #US does not underestimate Chinese determination to protect its interests

Reuters: #China's foreign ministry, asked about trade dispute with #US, says both countries have agreed to pursue talks process

8.41am BST

Better news from Europe -- shares are recovering in early trading, after hitting seven-week lows yesterday.

8.31am BST

The trade tariff tit-for-tat is now being described as a "trade war" in China, a significant change in tone says @Steen_Jakobsen on @BloombergRadio

8.31am BST

All the major Asian stock markets are in the red today, driven down by trade worries.

"In the short term, it looks like volatility is here to stay and we could see this risk-off, risk-on going on for a long time."

Related: Global markets fall as China hits back at US with new import tariffs

8.01am BST

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

Wars, we're told, are 99% boredom and 1% terror. But you simply can't be bored by the US-China trade war, which has intensified dramatically this week.

Dow, S&P 500 set for worst May tumble in nearly 50 years amid U.S.-China trade clash https://t.co/BQgSYBLdVI pic.twitter.com/4aJoFRc6Sk

"Negotiate- we can!
Fight- bring it on!
Bully us- YOU WISH!"
-People's Daily WeChat post entitled "This is #China's attitude" on the escalating trade war with @realDonaldTrump pic.twitter.com/pqh7tZWSgg

Further uncertainty on the back of China's retaliation to the US levies is forcing investors to go on full defensive mode. Safe haven assets gain as the 10-year US yields drop below 2.4%, reflecting market participants' worries about the potential knock on effect of this re-escalation.

Growth on a global scale seemed to be pulling higher in recent weeks but Trump's decision to put more pressure on China is again dampening any early optimism. Granted, there is still about a month before the new tariffs come into effect but, with both sides now back in the trenches, the risk lies to the downside

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