Germany returns to growth; relief as Trump ‘delays car tariffs’ - as it happened
Germany's economy has returned to growth, but retail spending has fallen in China and the US
- Latest: Trump to delay car tariffs
- US retail sales disappoint
- Chinese retail sales growth hits 16-year low
- Introduction: Germany grew by 0.4% in last quarter
- Minister: It's a ray of hope
9.06pm BST
Finally. the US stock market has ended higher for the second day running.
8.25pm BST
German carmakers roared to the top of the Frankfurt stock market today.
BMW gained 3.1% and Daimler rose by almost 3%, on relief that America might not impose new car tariffs for another six months (and may not ever?,....)
7.21pm BST
Technology companies are leading today's Wall Street rally.
Alphabet (Google) is one of the top risers on the S&P 500, up over 4%, with Facebook (+3.3%) and Twitter (+3%) also standing proud on the leaderboard.
"My expectation is that we will go to Beijing at some point in the near future to continue those discussions.
We're continuing discussions. There's still a lot of work to do."
7.11pm BST
Any procrastinator will tell you (if they can be bothered) that a problem delayed is a problem half-solved.
But if the White House does defer imposing new tariffs on foreign cars, the problem may just linger until Christmas.
The delay proposed by the Trump administration is merely a reprieve for officials in Brussels and Tokyo, as well as car industry executives who would be most affected by the action - because the threat of levies from Washington will remain on the table for most of 2019.
Most industry lobbyists were expecting Mr Trump to delay the imposition of car tariffs, or to announce and then suspend them, in order to avoid blowing up trade relations with the EU and Japan amid an escalation of the US's trade dispute with China.
5.20pm BST
European markets have closed higher, led by Germany.
Here's the closing prices:
The Dax performed an impressive turnaround this afternoon after a report on Bloomberg said that Trump was prepared to push back the decision on imposing tariffs on EU auto imports for 6 months. This was music to the ears of German car makers which shot higher, boosting the Dax. The euro also advance on the news (and weak US retail sales), which briefly overshadowed signs of trouble brewing in Italy.
Concerns of a renewed showdown between Italy and the European Union are unnerving investors. Italian bonds and stocks fell southwards a day after Italian Deputy Prime Minister Matteo Salvani stoked tensions by saying that he would be prepared to see the deficit rise above the EU's limits if employment levels improved.
4.52pm BST
Wall Street is pushing a little higher, with the Dow up 115 points at 25,647 points, a gain of 0.45%.
The tech-focused Nasdaq is up nearly 1%.
4.36pm BST
Holding off on new US car tariffs would be particularly good news for Germany, on top of its return to growth this morning.
German car sales - a key part of the economy - would suffer from new tariffs on the US border. America is due to make a decision by Saturday, although a delay now sounds likely.
3.37pm BST
Ahha:
Delaying auto tariffs means Congress essentially has 6 months to take action in case negotiations collapse.
Grassley has been drafting a bill to limit Trump's tariff power, but talks have been slow.
"We're not there yet," Rob Portman told me yesterday.https://t.co/BPa79BD5Gq
3.37pm BST
The US stock market has also shaken off its early losses, as traders welcome the news that America will resist new tariffs on cars.
Breaking - Stocks go positive on news Trump admin will delay auto tariffs
3.24pm BST
NEWSFLASH: CNBC is reporting that Donald Trump has decided to delay imposing new tariffs on car imports by six months.
If so, that's a boost to European carmakers, and may show that the White House is reluctant to trigger a new trade dispute with the EU (who would probably retaliate with their own new tariffs).
The Trump administration plans to delay auto tariffs by up to six months, stopping itself for now from further widening global trade conflicts, sources told CNBC on Wednesday.
The White House faces a May 18 deadline to decide whether to slap duties on car and auto part imports. By law, the administration has another 180 days to come to a decision as long as it is "negotiating" with its counterparts. Trump sees the tariffs as a way to gain leverage over trading partners such as the European Union and Japan amid trade talks.
Dax jumps >12k as Bloomberg is reporting that Trump will delay imposing auto tariffs, for "up to 6 mths" on imports from the EU and Japan. This did seem to be more or less what the market had been expecting (Trump had until May 18 to make a decision). pic.twitter.com/3veGMfsgHE
Auto stocks all moving higher on reports the Trump Administration plans to delay imposing higher tariffs on foreign autos and auto parts.
3.20pm BST
US treasury secretary Steven Mnuchin is testifying on Capitol Hill now.
He's told lawmakers that he expects to visit Beijing soon for more trade talks - a sign that the negotiations aren't dead in the water yet.
3.05pm BST
Over in New York, shares are dropping as this morning's weak economic data worries investors.
2.34pm BST
OOF! US factory output has fallen, for the third time in four months.
Most major market groups posted decreases in April. The production of consumer goods fell 1.2 percent, with declines for both durables and nondurables. The index for durable consumer goods moved down 0.8 percent, mostly because of a drop in the output of automotive products, while the output of nondurables was held down by sizable declines for both chemical products and consumer energy products.
Production decreased for business equipment, construction supplies, and business supplies, but output advanced for defense and space equipment and for materials. Among the components of materials, a drop for durables was more than offset by gains for nondurable and energy materials.
2.15pm BST
The surprise 0.2% fall in US retail sales last month is a worrying sign, say economists.
Andrew Hunter of Capital Economics points out that demand for clothes, computing goods was weak, as was online shopping.
The decline in headline sales values came despite a near-2% m/m rise in gasoline station sales, following the 6.3% m/m surge in prices last month.
That was outweighed by a fairly sharp 1.1% m/m fall in motor vehicle sales. Even excluding those more volatile items, however, control group sales were unchanged last month, held down by weakness in electronics, clothing and non-store retail sales
US #retail sales miss w/ -0.2% in April:
- (expected) weakness in #auto sales (-1.1%)
- unexpectedly weak sales electronic stores (-1.3%) & building material/garden equip (-1.9%)
- online & clothing -0.2%
- gasoline +1.8% (due to prices)
- core retail sales disappointingly flat pic.twitter.com/UOKuq6kInA
Momentum in the #retail sector has cooled in recent month driven by softer auto sales and reduced #housing activity constraining furniture & building equip sales.
Clothing & online sales also softer.
> #Consumer spending not as bad as Q1 indicated, but definitely softer than 2018 pic.twitter.com/j5dr63zgAj
Putting aside the tariff debate (which hasn't previously impacted most retail goods manufactured in China), today's retail sales data is a verdict on the ability of wholesalers/retailers to pass through intermediate price increases to consumers.
And the verdict is: they can't.
1.49pm BST
Futures have taken a turn for the worse after disappointing retail sales figures for April. Even sales at nonstore retailers - i.e. online/$AMZN - fell last month.
1.45pm BST
Newsflash: US retail sales have fallen unexpectedly.
Retail sales declined by 0.2% in April, rather worse than the 0.2% rise expected by economists. That follows a 1.7% rise in March.
US 2y yields drop below 2.15%, lowest since Feb2018 as retail sales fall 0.2%, missing expectations. pic.twitter.com/YiI8qzksxe
1.31pm BST
Having slumped on Monday, and rallied on Tuesday, Wall Street is expected to dip back into the red when trading begins in an hour's time.
US Opening Calls:#DOW 25469 -0.27%#SPX 2825 -0.34%#NASDAQ 7372 -0.36%#IGOpeningCall
It does seem the trade war tensions are going to be here to stay for the time being and you have rising tensions in the Middle East with drone strikes and issues in the Strait of Hormuz etc. There is talk of more sanctions on Hungarian citizens in the wake of Trump's visit with Orban and that just illustrates the tug of war going on in Eastern Europe as China and Russia continue to assert themselves with member countries of the Belt and Road [China's huge infrastructure spending project].
The talk last night was around the soft data out of China and some of the rest of the region and the narrative became that China would likely provide more stimulus as a result which should be good for asset markets.
The bad is good scenario for why risk assets should rally on poor data. The problem with that narrative is that it works until it doesn't. If the data becomes so bad that stimulus isn't going to be enough to rescue it then the house of cards falls apart. Speaking mostly of equity prices and the reaction function to negative data, not about China as a whole. I am not a China is going to implode type of guy, I actually think they will hold in just fine albiet at a lower level of growth. My point is more that we are in for a rocky ride.
1.24pm BST
The pound is weakening today as traders brace for another instalment in Britain's least favourite saga - Brexit.
Sterling has shed a third of a cent against the US dollar to $1.287, a three-week low, after the government confirmed it will bring its Withdrawal Deal back to parliament again.
cable 1.2890. breached 1.29, now eyes the key late April low test at 1.2860 pic.twitter.com/pW3sRU6eea
12.53pm BST
Bad news for Germany....Allianz economist Katharina Utermihl fears that growth will soon fizzle out, unless there is a trade war breakthrough.
She predicts that the economy "is likely to lose momentum" in the months ahead, having bounced back in the last quarter:
In view of the difficult global environment, a V-shaped recovery in industry is not on the cards and domestic demand is likely to slow without tailwind from foreign trade."
12.17pm BST
Back in Germany, police, prosecutors and tax investigators have launched a series of raids today, looking for evidence of tax fraud.
The probe is centred on Deutsche Bank, and allegations that some wealthy customers hid money in offshore companies.
German criminal prosecutors, police and tax investigators this morning began raiding eleven German lenders looking for evidence of suspected tax fraud by clients of a former Deutsche Bank offshore unit.
The raids are taking place in Frankfurt and six other cities across Germany and involve officers from the Federal Criminal Police, the Hamburg State Office of Criminal investigation and six different regional tax authorities. Eight individuals who were clients of a British Virgin Islands-based former Deutsche Bank unit are in the crosshairs of the investigators.
German authorities raid 11 banks in tax fraud probe. Another headache for @DeutscheBank that could really do with a few weeks w/ no negative headlines @OlafStorbeck https://t.co/mcAwDO5npt via @financialtimes
The investigations today are not directed against Deutsche Bank. The public prosecutor's office is investigating private individuals. Deutsche Bank cooperates and voluntarily submits all requested documents. A search of our business premises has therefore not taken place.
11.11am BST
President Xi also told his fellow Asian leaders that countries shouldn't dictate to each other -- another jibe at America's foreign policy approach?
"Exchanges and mutual learning among civilizations should be reciprocal and equal.
They should be diversified and multidirectional, rather than compulsory or coercive. They should not be one-way."
10.52am BST
China's president has blasted trade protectionism in his first major speech since the US imposed higher tariffs on $200bn of Chinese goods.
Opening the Conference on Asian Civilizations Dialogue in Beijing on Wednesday, Xi said there was no need for "civilizations to clash with each other.""No civilization is superior over others.
The thought that one's own race and civilization are superior and the inclination to remold or replace other civilizations are just stupid," he said, adding to do so would invite "catastrophic consequences."
10.30am BST
Nancy Curtin, chief investment officer of Close Brothers Asset Management, has welcomed the pick-up in eurozone growth last quarter.
"Growth in the EU continues to beat expectations, proving the disastrous beginning of the year to be an anomaly. While the region has a long way to go, things are looking up; the services and housebuilding sectors are doing better than expected, eurozone unemployment is at a ten year low, and wage growth is beginning to improve. This should help consumer confidence and, in turn, consumption.
The eurozone is an export-led economy, and global trade is at its weakest in a decade. Trade tensions continue to take centre stage for the world economy, looming as a circuit breaker to global recovery. Unless we reach resolution, the EU must be open to fiscal intervention to avoid a downturn."
10.17am BST
Employment growth across the eurozone has also picked up, in another encouraging sign for the region:
Euro area employment growth picks up again, to an annualised rate of 1.4% in Q1 (+0.3% QoQ). pic.twitter.com/HHKgsA8sEH
10.06am BST
We now have confirmation that the eurozone grew by 0.4% in the first quarter of 2019.
That matches the initial estimate two weeks ago (before this morning's German GDP had been calculated), and is twice as fast as in Q4 2018.
Euro area #GDP +0.4% in Q1 2019, +1.2% compared with Q1 2018: flash estimate from #Eurostat https://t.co/dyguU4HN6Y pic.twitter.com/7UB6dgTAmO
9.56am BST
Back in the eurozone, Portugal has posted solid growth in the last quarter.
Portuguese GDP increased by 0.5% in January-March, a little faster than Germany, matching the UK's growth rate for Q1.
#Portugal #GDP Growth Rate QoQ Prel at 0.5% https://t.co/o9PhlMR2av pic.twitter.com/1NDm93FlXX
9.46am BST
In another worrying sign, China's fixed-asset investment growth also slowed last month.
FAI grew 6.1% year on year in the first four months of 2019, down from 6.3% in January-March alone, the National Bureau of Statistics reported.
Fears grow that tariffs will hurt a H2 recovery in #China after data disappoints again. pic.twitter.com/7ts9DE7ZHe
9.43am BST
Today's disappointing Chinese economic data isn't a blip.
As this tweet shows, retail sales and business investment growth have been slowing for months, while industrial production has been jittery:
With markets in rebound mode, it was a good day for Chinese data to disappoint. Chart shows yoy changes in YTD data to smooth out fluctuations. Investment (blue) looks to have stabilised since mid-2018 but retail sales (red) are still decelerating. IP (white) is inconclusive. pic.twitter.com/8h8NIH8zJO
9.25am BST
European stock markets have fallen into the red this morning, despite the encouraging news from Germany.
Instead, the disappointing slowdown in China's retail sales and industrial output growth is worrying investors, coming on top of the existing trade war jitters.
9.23am BST
Matthias Weber, Economist at the University of St.Gallen, also believes Germany isn't investing enough - because it's obsessed with balancing its budget.
Public investments in railways, roads, bridges, childcare centers, public schools, and renewable energy are much needed. Such investments could currently be made at an extremely low (even negative) interest rate and they would boost the slowing aggregate demand.
It is unfortunate that some politicians cling to an economically unsound "concept" of zero debt and therefore miss out on these investment opportunities for Germany.
9.19am BST
Germany's economy ministry has welcomed the pick-up in growth last quarter -- but also warned that the US-China trade war is still a key threat.
In a new report, the ministry says:
"The German economy has not yet overcome its weak phase with the good start to the year - that will only be sustainable if the external environment improves and the uncertainty particularly caused by trade conflicts decreases."
8.47am BST
Weak economic data from China overnight is fuelling concerns that its economy is suffering from the trade war with the US.
Chinese retail sales growth fell to 7.2% year-on-year in April -- the weakest annual reading since 2003. That suggests consumers are cutting back -- either because they're worried about economic conditions, or because they've simply got less disposable income.
There is no sugar coating these numbers, they are dreadful and show that the March rebound was probably a flash in the pan, or a symptom of a distortion caused by Chinese New Year.
This sharp slowdown increases the likelihood that we will probably see further attempts by China to help stimulate its economy, as well as raising concerns that any hopes of a Chinese economic rebound helping to prompt a global pickup in economic activity look a little bit forlorn at this point in time.
8.35am BST
Over in Beijing, China has hit out at America over its treatment of companies such as Huawei.
Foreign ministry spokesman Geng Shuang has accused the US of using its national power to dishonourably "smear" Chinese companies.
Related: Huawei 'prepared to sign no-spy agreement with UK government'
8.21am BST
Germany's return to growth coincides with a rise in water levels on the Rhine river.
Europe's largest economy barely skirted a recession last year after it took a hit from factors including disruption to automobile production and low water levels on the River Rhine transport artery. While some of those issues have faded, more pronounced protectionist measures could damp business sentiment in the export heavy nation. Thyssenkrupp on Tuesday noted a "weakening macro environment" as it reported a drop in profit.
An escalating trade war is "very difficult for any country or economy that is highly dependent on foreign trade like Europe, and particularly Germany," said Erik Nielsen, chief economist at UniCredit Group. "They are going to be hit more than the others, so this is the big fear."
8.10am BST
German Q1 GDP at +0.4% q/q was a touch weaker than we had penciled in, but still showed a remarkable resilience of domestic demand to the many external headwinds. 1/n pic.twitter.com/WYs4bBULO2
7.52am BST
Germany's welcome return to growth in the last quarter suggests that any panic about the state of the eurozone's largest economy was overdone, argues Carsten Brzeski of Dutch bank ING.
He writes:
Today's GDP data is balm for the soul of the German economy.
It also confirms our long held view that not all is bad in the German economy. Some of last year's one-off factors have turned around, the German automotive industry might have seen better times but should not be written off and private consumption remains solid. In fact, the ongoing dichotomy between struggling industry and strong domestic demand continues and at least this time around ended with a positive outcome.
Just as weak GDP data in the second half of 2018 was not purely a result of wrong policies and business decisions or a sign that the German economic business model should be discarded, so today's strong data is no reason for complacency.
7.42am BST
Domestic demand has helped Germany's economy extract itself from its recent stagnation, points out Aila Mihr of Danske Bank:
But she also points out that recent surveys of manufacturers have been gloomy, so 2019 could still be tough.
After narrowly avoiding a recession in H2 18, #German #GDP #growth rebounded to 0.4% q/q in Q1. Domestic demand continues to underpin growth and temporary headwinds unwind. But many risks to outlook linger amid goomy #PMIs, declining factory orders and potential US car #tariffs pic.twitter.com/lIvjykSsjS
7.35am BST
Germany's economy ministry Peter Altmaier has hailed today's growth figures, calling them a "first ray of hope".
But Altmaier has also warned that the US-China trade war is still threatening the German economy.
"The international trade disputes are still unresolved. We must do everything possible to find acceptable solutions that enable free trade."
7.17am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
#Bruttoinlandsprodukt im 1. Quartal 2019 um 0,4 % gegeni1/4ber dem Vorquartal gestiegen. https://t.co/pgK7FiOAUO #BIP pic.twitter.com/YN0It3u6VD
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!
Energy bosses hoping for a loophole in Corbyn's nationalisation pledge will be disappointed: Labour is out to take it all in what could prove to be the biggest energy shakeup of a generation https://t.co/Fl6SyefLQV
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