Korean summit plans cheer markets as Paul Ryan calls for 'surgical' tariffs - as it happened

Graeme Wearden

from on 2018-03-06 21:24 (#3HEQZ)

All the day's economic and financial news, as hopes of a breakthrough between North and South Korea cheer investors

9.24pm GMT

And finally, Wall Street has ended the day pretty much where it started it.

5.02pm GMT

Barry Gardiner MP, shadow Secretary of State for International Trade, is calling for the UK government to take a tougher line over Trump's tariffs.

Gardiner (a member of the opposition Labour party) says strong action is needed:

"President Trump has made clear his appetite for a trade war. It started with Bombardier, and has now moved on to steel and aluminium. We are seeing a real threat to thousands of British jobs linked to UK exports to the US. On top of that there is a risk that other steel exporting countries try to reroute their surplus capacity from the US into the UK.

"We need strong government action now, including at a multilateral level through the WTO, before entire sectors of UK industry are left wondering who's next."

5.01pm GMT

Ding! European stock markets have closed, with cautious optimism pushing shares higher.

The FTSE 100 ended the day up 30 points at 7,146, up 0.4%.

North Korea has agreed to refrain from carrying out any further missile tests, whilst engaging in dialogue with South Korea. North Korea has also expressed an interest in holding talks with the US. These comments were made by Kim Jong Un to South Korea's national security chief in what can only be described as a complete change in tune from the rogue nation.

Fears over a trade war appear to be abating as opposition to the measures, even from with Trump's own party are increasing. Whilst trade war fears haven't been completely erased, its fair to say that there are increasing doubts as to whether Trump will be able to go ahead with such a risky economic policy.

4.32pm GMT

Wall Street's early rally is fizzling out. The Dow is now down 130 points, or 0.5%, having been up over 100 points at the open.

4.20pm GMT

Nancy Curtin, Chief Investment Officer at Close Brothers Asset Management, has warned the markets not to get complacent about the dangers of a trade war:

"While the deficit with China was the initial focus of much of Trump's ire, the real casualties of the proposed trade tariffs on steel and aluminium would be Canada and Mexico - both close allies. This may be part of a wider negotiating tact, flexing muscles in the run up to NAFTA negotiations. However, steel and aluminium import volumes make up little of the overall deficit, hence the actual economic impact of these tariffs is likely to be minimal. But the ripple effect is as yet unknowable if it causes further retaliation beyond words.

Moreover, if these tariffs are a precursor to tougher trade relations with China, which alone accounts for over half to the US trade deficit, then this friction could have economic consequences.

Donald Trump's bite may yet match his bark. In this case, we would expect the US dollar to rebound against the Mexican peso and the currencies of many other emerging economies, despite their weaker direct trade ties with the US.

Admittedly, the US president's attitude to trade is not the only influence on the exchange rates of emerging market currencies. This can clearly be seen in the case of the Korean won. It has appreciated by more against the greenback so far this month than any other currency in the Fed's broad dollar index, amid signs of a thawing of relations between North and South Korea.

4.16pm GMT

In another twist, Trump's treasury secretary, Stephen Mnuchin, has just declared that Mexico and Canada could be exempted from new steel and aluminium tariffs.

Testifying to Congress, Mnuchin says that Canada wouldn't be subject to them... IF the NAFTA trade deal is successfully renegotiated.

Just in: Secretary Mnuchin tells House Approps Committee that Canada *may* get excluded from #tariffs
"Canada is a very significant partner that buys steel and and sells steel. To the extent we're successful renegotiating NAFTA, Canada won't be subject to the tariffs."

4.05pm GMT

There's growing speculation that Gary Cohn, Donald Trump's top economic advisor, could quit the White House over the tariffs row.

Cohn, a former president of Goldman Sachs, is fighting a rearguard action against Trump's plan -- calling in US business leaders who firms would be hit if steel and aluminium imports were costlier.

President Donald Trump has told advisers that he believes economic adviser Gary Cohn will leave his White House job if Trump decides to go forward with tariffs on imported steel and aluminum, people familiar with the matter say.

Cohn has mounted a last-ditch effort, along with other administration officials and some Republican lawmakers, to head off steep tariffs that threaten to unleash a global trade war.

The new Fake News narrative is that there is CHAOS in the White House. Wrong! People will always come & go, and I want strong dialogue before making a final decision. I still have some people that I want to change (always seeking perfection). There is no Chaos, only great Energy!

BREAKING: Trump tells advisers he believes Gary Cohn will leave if tariffs are instituted, sources say https://t.co/V9MUdzNkx2 pic.twitter.com/7bpCo3lhzB

3.51pm GMT

Here's a chart putting January's fall in US factory orders into context:

U.S. Factory Orders Slump Slightly More Than Expected In January https://t.co/f3O2Y2eXS1 pic.twitter.com/eHczukURZV

3.35pm GMT

Newsflash: Top Republican Paul Ryan has called for 'surgical' tariffs to be imposed on countries who are dumping steel and aluminium on the US economy.

There clearly is dumping and trans-shipping of steel and aluminium. That's absolutely happening. There's a big overcapacity problem. Let's go and focus on that. Let's focus on the abusers of that.

That's why we think the proper approach is a more surgical approach, so we do not have unintended consequences".

3.24pm GMT

Just in: US factories have suffered their biggest drop in orders in six months.

New orders for US-made goods shrank by 1.4% in January, new figures from the Commerce department show. That's the worst performance since last July, and follows a 1.8% gain in December.

U.S. factory orders post biggest drop in six months https://t.co/W3xDkS5223

3.03pm GMT

The markets may be up, but there's no escape from Brexit anxiety.

Today's warning comes from the head of carmaker Vauxhall, who has warned that the lack of clarity over Britain's exit from the EU threatens the future of its Ellesmere Port factory in North West England.

"We cannot invest in a world of uncertainty.

No one is going to make huge investments without knowing what will be the final competitiveness of the Brexit outcome."

First Airbus. Now Vauxhall.https://t.co/H2fNDDarD9

2.47pm GMT

The New York stock market has just opened....and stocks are rising.

The Dow has gained 80 points, or 0.3%, and there are similar gains on the S&P 500 and the Nasdaq.

Risk appetite has improved on headlines North Korea has expressed a willingness to talk about denuclearization, according to South Korea. The North is apparently willing to discuss surrendering its nuclear weapons and freeze nuclear and missile programmes if it begins direct talks with the US. This is a dramatic easing of tensions. It follows a visit by senior South Korean politicians. Now it has emerged that Kim Jong-un will be meeting South Korean president Moon Jae-in in late April.

Meanwhile fears over Donald Trump's imposition of tariffs on imports of steel and aluminium have also eased after top Republicans advised against the plan.

2.22pm GMT

The US president has poured a little cold water over the markets' enthusiasm, warning that the breakthrough between North Korea and South Korea could be 'false hope'.

Possible progress being made in talks with North Korea. For the first time in many years, a serious effort is being made by all parties concerned. The World is watching and waiting! May be false hope, but the U.S. is ready to go hard in either direction!

1.17pm GMT

Here's political scientist Ian Bremmer of Eurasia Group on the Korean breakthrough:

Any reason to believe N Korea would ever denuclearize? No.

Any reason to engage in talks to reduce prospects of war? Absolutely.

1.16pm GMT

Oil is also rallying, on hopes of detente between the two Koreas.

Brent crude has gained almsot 1% to $66.09 per barrel.

#Oil rises to session highs above $66 after #SKorea says #NorthKorea is willing to hold talks w the US on denuclearisation. USD down, commods up #OOTT @Ole_S_Hansen pic.twitter.com/ITxgsSyz3c

12.40pm GMT

Here's my colleague Benjamin Haas in Gangneung, South Korea, on the breakthrough with North Korea today that has cheered the markets.

North Korea is willing to discuss relinquishing its nuclear weapons, and will freeze its nuclear and missile programmes if it begins direct talks with the US, in a dramatic easing of tensions following a visit by senior South Korean politicians.

The country's leader, Kim Jong-un, will also meet his South Korean counterpart, president Moon Jae-in, in late April in the first summit of its kind in over a decade, Seoul's presidential office said. The two leaders will meet at Panmunjom, the only part of the highly militarised border where the North and South have any kind of contact.

12.19pm GMT

The South Korean won is getting a big boost - gaining 1.1% against the US dollar following the reports of a breakthrough with North Korea.

South Korea's currency is rallying while the dollar sinks after news emerges of a significant diplomatic breakthrough between the two Koreas. https://t.co/EAB2ELZg8x pic.twitter.com/HReX33yThB

11.56am GMT

The US dollar has suddenly slumped, and Wall Street futures have rallied, following reports that North and South Korea have agreed to hold a summit next month.

This would be the first such summit in a decade, and could signal that relations between Seoul and Pyongyang are thawing.

BREAKING: Seoul says North and South Korea have agreed to hold summit talks in late April.

"North Korea has clearly expressed its intention for denuclearlization on the Korean peninsula, and if there is no military threat, and North Korea's regime security is promised, they have clarified that there is no reason to hold nuclear weapons."

USD just fell out of bed pic.twitter.com/tDAqcxYq99

Wow. Watching the markets- Dow futures ai 150 after North Korea says willing to talk about denuclearization, summit. @wsbtv

*NKOREA OPEN TO DENUCLEARIZE IF REGIME SAFETY GUARANTEED: SKOREA
Seems like a silly reason for risk sentiment to jump higher (what does a guarantee of "regime safety" mean...) - but stocks up, bond yields up & #FX markets falling back into the pattern of broad-based #USD weakness pic.twitter.com/8Dw0TN0BSf

11.21am GMT

Department chain John Lewis has given us an insight into the damage caused by last week's disruptively snowy weather.

11.07am GMT

A round of applause for City AM please....

Genius headline. H/t @Jack_Blanchard_ pic.twitter.com/b0vkp3idlI

11.01am GMT

After three hours of trading, Europe's stock markets are holding onto their early gains.

The FTSE 100 is up 71 points, or 1.01%, at 7,187 - extending yesterday's recovery from Friday night's 14-month low.

"Global stock markets continue to trade within their medium-term trading range after another sell-off last week.

"We expect they will continue to rise as fears of a trade war have subsided and there is some optimism that a Brexit transitional deal will be reached. Meanwhile, the Italian election had no major surprising outcomes, but the strong support for North League will unnerve the European Central Bank with its Eurosceptic stance.

Italian 10-year government bond spreads now tighter than they were on Friday, before the surprisingly strong populist showing in Sunday's election. For reasons. Thank you for playing. pic.twitter.com/Gz5l83DRtU

10.49am GMT

Back to trade war fears..... and Bloomberg is reporting that the EU is drawing up its retaliation if Donald Trump imposes tariffs on steel and aluminium.

Levi's jeans, bourbon and US motorbikes are all on the list of products that could be slapped with a 25% tariff.....

The European Union is preparing punitive tariffs on iconic U.S. brands produced in key Republican constituencies, raising political pressure on President Donald Trump to ditch his plans for taxing steel and aluminum imports.

Targeting a2.8bn ($3.5bn) of American goods, the EU aims to apply a 25 percent tit-for-tat levy on a range of consumer, agricultural and steel products imported from the U.S. if Trump follows through on his tariff threat, according to a list drawn up by the European Commission and obtained by Bloomberg News.

10.16am GMT

Craft beer group BrewDog is facing a backlash this morning after launching a new beer for female drinkers dubbed Pink IPA.

It's their normal Punk IPA, but bottled in a pretty pink label. It'll be sold at a 20% discount in BrewDog bars to those who identify as women - to highlight the gender pay gap.

"Sexism in the beer industry is rife. We can no longer ignore that its existence prevents plenty of incredible women joining our eclectic and exciting industry. There is a long history of products that pander and patronise through harmful, sexist stereotypes and vulgar imagery, and we're rallying to put an end to this nonsense.

The love of beer is not gendered. Beer is universal. Beer is for everyone."

This is not 'beer for girls'. This is beer for equality.

Pink IPA has landed.https://t.co/MRWnqaADXg pic.twitter.com/J9Kk4khk1h

I'm a huge @Brewdog fan but oh dear me.... https://t.co/7o4f9Hugaz

Ah, I see BrewDog is now that lad from your A-level politics class who makes "get back in the kitchen" jokes but it's OK because he's being "ironic" and is actually a "feminist" pic.twitter.com/F9xiK7xRJx

Damn, that's some lazy, low-level trolling BrewDog. https://t.co/QJ9ry8C7Bi

Really brave and clever stuff from everyone's favourite craft brewer BrewDog - nice! https://t.co/11Q52aO2Xx

10.01am GMT

Newsflash: The UK government has launched an investigation into the way the Co-operative Bank was regulated in the aftermath of the financial crisis.

The probe will focus on Co-op's failed attempt to take over more than 600 branches from Lloyds. That bid collapsed in early 2013 when the problems on Co-op's balance sheet came to light.

The British government on Tuesday asked the Prudential Regulation Authority (PRA) to investigate its oversight of Cooperative Bank, in an independent review aimed at shedding light on how the troubled lender was supervised during 2008 and 2013.

It said the investigation would focus on the Cooperative Bank's failed bid for 632 branches of Lloyds Banking Group in 2013.

9.46am GMT

Paul Flowers, the former Co-op Bank chairman who was dubbed the 'Crystal Methodist' after being caught in a drugs scandal in 2013, has been banned from working in the City.

FCA skewers former Co-op Bank chairman Paul Flowers for using work email for sex and drug buys. Flowers said he didn't have a personal email account at the time. https://t.co/f6XjaBxJuC

Hilarious. Paul Flowers, the crystal Methodist, banned from City today - not for helping drive Co-op Bank over the edge, but for using work phone to call premium rate numbers. pic.twitter.com/I24G5OXbtK

9.43am GMT

The parliamentary session on the GKN takeover is underway - it's being streamed live here. We'll keep an ear on it.....

9.13am GMT

A group of cross-party MPs has urged business secretary Greg Clark to block the proposed 7bn hostile takeover of the British engineering company GKN by turnaround specialist Melrose.

Ahead of this select committee appearance by executives from both companies on Tuesday, the 16 MPs asked Clark to intervene in order to prevent a "world class" industrial company from being "dismembered", relating to concerns that Melrose would break the 259-year-old company into pieces before selling it off.

"A takeover of GKN by Melrose is highly likely to mean the break-up of GKN, and the selling on - and possible disappearance - of several of its constituent important components including its aerospace, driveline, powder metallurgy and additive divisions," the MPs wrote, according to the Financial Times.

9.11am GMT

Britain is facing a sharp jump in business failures, according to a new report from trade insurer Euler Hermes.

Euler Hermes warned overnight that the number of insolvencies in the UK will increase by +8% in 2018. That follows a 5% rise in 2017, as firm struggle to cope with rising costs and falling consumer confidence.

The UK will experience the second largest rise in business failures of any of the major global economies this year as uncertainties about Brexit become more pronounced.

The rise in insolvencies has the potential to start a domino effect of overdue or non-payment which, as we have seen in recent months, can impact large companies and smaller suppliers throughout entire supply chains.

At the same time, two possible base rate increases (+50bp to 1%) this year may progressively translate into higher interest costs for companies and households. Monitoring client and supplier payment behaviour is key given the high levels of uncertainty, company debt and thin corporate margins in some sectors.

9.07am GMT

There's a frisson of takeover action in the City this morning.

"The Board of Smurfit Kappa has unanimously rejected this unsolicited and highly opportunistic Proposal. It does not reflect the Group's true intrinsic business worth or its prospects.

Smurfit Kappa upp 18%, hir hemma tydligast effekt i $BILL pic.twitter.com/Qf3LQ1mB0d

8.54am GMT

The president and CEO of Volvo has warned that it could abandon expansion plans in America, if Donald Trump triggers a trade war.

If we cannot trade freely, you question can you really employ two thousand extra people?

If you think it through, everyone will see that it's beneficial for everyone to trade freely.

We believe in free trade and it's good for everybody.

8.35am GMT

A risk-on feeling has pushed European stock markets higher in early trading.

Investors are putting trade war fears, and the inconclusive Italian election, behind them (for now, anyway).

While this signals yet more destabilising discord for the President, investors' primary focus was on the tariff-blocking obstacles created by Ryan and co., and their relief was immediate to see.

8.30am GMT

There's relief in the markets that other world leaders haven't retaliated against the US over the planned tariffs on steel and aluminium.

In particular, Beijing has taken a cautious stance, with Chinese officials insisting they don't want a trade war with America.

On the back of this pause in trade tensions, currencies and equities are able to breathe easier with the major European currency pairs and the US equity markets leading the gains, which has started the week on a positive footing.

However, this respite from risk aversion should be treated as just a break and traders need to remain cautious until we get a clear response from China, and the Eurozone, to Trump's protectionist decision.

7.55am GMT

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

Investors seem to believe that President Trump is using his "Art of the Deal" skills to get a better trade deals with the rest of the world or, as Ray Dalio, the Bridgewater Associates founder, wrote on Monday: "what is happening now is more for political show than for real threatening."

Trump tweeted yesterday that "Tariffs on steel and aluminum will only come off if new & fair NAFTA agreement is signed". This confirms my belief that this mess will likely end up with Mexico, E.U. and China taking a less protectionist stance, rather than the U.S. taking a stronger one.

European Opening Calls:#FTSE 7150 +0.48%#DAX 12192 +0.84%#CAC 5198 +0.59%#MIB 21975 +0.71%#IBEX 9634 +0.45%

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