IMF warns on trade wars; China's economic growth slows – as it happened

Graeme Wearden

from on 2018-07-16 18:19 (#3TYMA)

All the day's economic and financial news, including new growth figures from China and the IMF's latest World Economic Outlook

Latest: IMF says trade conflict is top threat
China challenges US tariffs at WTO
Chinese growth slows to 6.7% in Q2 2018
Industrial production growth slowed, but retail picked up
Robot demand has slowed
Beijing warns of 'increased uncertainties'

7.19pm BST

And finally, London's stock market closed lower tonight.

The FTSE 100 lost 61 points to end at 7,600, a fall of 0.8%. Miners and oil companies were among the fallers, following the slowdown in Chinese growth and persistent worries about trade spats.

The FTSE fell heavily on Monday, dipping below 7600, as commodity stocks and a stronger pound weighed on the index. With the Chinese economy expanding at a slightly slower pace in Q2, metal prices tumbled, causing mining stocks to trace the price lower, which oil majors slipped as oil tumble 3%.

Given the heavy weighting of resource stocks on the FTSE, the blue-chip index lagged significantly behind its European peers.

3.51pm BST

Here's our economics correspondent Richard Partington on the IMF's new economic forecasts:

Rising trade tensions between the United States and the rest of the world could cost the global economy $430bn (324bn), with America "especially vulnerable" to an escalating tariff war, the International Monetary Fund has warned.

Delivering a sharp rebuke for Donald Trump, the Washington-based organisation said the current threats made by the US and its trading partners risked lowering global growth by as much as 0.5% by 2020, or about $430bn in lost GDP worldwide.

IMF warns Trump trade war could cost global economy $430bn https://t.co/ImWnMYVOLo

3.42pm BST

Just in: CNBC are reporting that Goldman Sachs will name their new CEO tomorrow morning.

David Solomon, currently president of Goldman Sachs, will be promoted to succeed Lloyd Blankfein, they say.

3.21pm BST

The IMF expects advanced economies to slow next year, while emerging markets will power on.

Advanced economies' growth is expected to remain above trend at 2.4% in 2018 before easing to 2.2 percent in 2019 https://t.co/0XUacVSx69 pic.twitter.com/uqamGr7C9X

3.12pm BST

The IMF's Maurice "Maury" Obstfeld is speaking now, warning that the global recovery has plateaued and become less balanced.

Obstfeld says:

We continue to project global growth rates of just about 3.9 percent for both this year and next, but judge that the risk of worse outcomes has increased, even for the near term.

Political uncertainty has risen in Europe, where the European Union faces fundamental political challenges regarding migration policy, fiscal governance, norms concerning the rule of law, and the euro area institutional architecture. The terms of Brexit remain unsettled despite months of negotiation.

3.00pm BST

Newsflash: The International Monetary Fund has warned that hundreds of billions of dollars of growth will be wiped out, if a full-scale trade war breaks out.

The IMF estimates that the global economy will be 0.5% smaller by 2020 if the various tariffs threatened by the US, China, Europe, Mexico, Japan and Canada are all implemented.

The risk that current trade tensions escalate further-with adverse effects on confidence, asset prices, and investment-is the greatest near-term threat to global growth.

Global current account imbalances are set to widen owing to the United States' relatively high demand growth, possibly exacerbating frictions. The United States has initiated trade actions affecting a broad group of countries, and faces retaliation or retaliatory threats from China, the European Union, its NAFTA partners, and Japan, among others.

IMF maintains 2018 global GDP growth forecast at 3.9%
Cuts Euro Area, Japan and UK forecasts pic.twitter.com/oa2tRFjnG3

2.43pm BST

It's pretty obvious that trade wars can make imports more expensive, as tariffs are effectively paid by consumers.

On Saturday in Dallas, as many as 30 people on a local bacon-focused food tour were set to traverse the city chomping down on bacon donuts, bacon brown sugar ice cream, bacon jam and candied bacon. While retail bacon prices are down in the past 12 months, they're still up from six years ago, so any relief from higher costs will be welcome news to the pork enthusiasts.

"It's almost like a bonding experience," said Jeanine Stevens, the owner of Dallas Bites! Tours, which takes participants to little known restaurants and other eateries. "Bacon is a kind of food that people just feel a little bit lighthearted about. It's a fun food."

Donald Trump's trade wars are making pork a bargain https://t.co/9ECuX5VQa3 via @megandurisin @helloimjustina pic.twitter.com/d5owOUfkwU

2.08pm BST

Vincent-FreAdeAric Mivelaz of Switzerland's SwissBank is concerned by today's Chinese growth figures.

Mivelaz points out that there are signs of weakness, with fixed asset investment dropping from 6.1% to 6% per year in June, industrial production growth down to 6% from 6.8%, and retail sales growth below their recent average.

Money supply is tightening, due to caution of financiers and debt risk, so the Chinese economy is expected to slow down industrial activity and private consumption. Trade tariffs will be a key factor in coming months.

1.53pm BST

Here's our Beijing correspondent, Lily Kuo, on China's retaliation against America's tariffs:

China has filed a complaint against the US at the World Trade Organisation over Donald Trump's threats to place tariffs on an additional $200bn worth of Chinese goods.

The one-sentence announcement on Monday, from China's ministry of commerce, comes less than a week after the US president called for a second round of tariffs on China, in retaliation for Chinese tariffs placed on American goods.

1.41pm BST

Newsflash: US retail sales grew steadily last month, indicating that America's economy is growing steadily despite tariff worries.

Consumer chugging along: Retail sales up a solid 0.5% m/m in June (in-line with exp.) with upward revisions in prior months https://t.co/AwtoXCMkUF pic.twitter.com/rNWc4Doark

US retail sales a mixed bag in June. Headline was +0.5% after +1.3% in May. However, core sales (ex food, gasoline, building materials and autos) were flat in June, after +0.8% in May. Q2 growth was up on Q1: +7.9% annualised vs 1.8% for headline and +6.5% vs 2.1% for core. pic.twitter.com/yPFTqhFEP4

1.32pm BST

Here's a handy chart, showing how the availability of credit in China has recently been reined in, after a long period of loose monetary policy after the financial crisis.

China ha supuesto la mayor parte de creacion de cri(C)dito privado en el mundo desde 2008. Via Citi pic.twitter.com/Gho4mMNbfN

12.52pm BST

London's stock market has fallen into the red, as City traders fret about the risk of a tradw war.

The FTSE 100 has shed 88 points, or over 1%, to 7573. After a slow start, equities took a hit as the oil price fell, hitting shares in energy producers and miners.

The FTSE's initially meagre losses gathered pace as Monday went on, the index dragged lower by its commodity stocks.

With Brent Crude slipping 1.1%, and copper down 0.7%, both suffering in light of China's Q2 slowdown, the FTSE's hefty oil and mining ended up in the red, dragging the UK index lower in the process.

11.54am BST

Getting back to trade, the boss of asset management giant BlackRock has warned that Donald Trump's trade dispute with China will hurt growth.

Larry Fink told Bloomberg TV that America's economy would suffer if the White House imposes tariffs on an extra $200bn of Chinese imports (as it threatened last week).

GDP will slow down dramatically.....we'll have even more uncertainty about the state of the world.

BLACKROCK'S FINK SAYS IF WE HAVE FULL TARIFF WARS, SEES MARKETS DOWN 10-15%

11.37am BST

Defence secretary Gavin Williamson says the UK's new concept fighter jet will help the country ""fly higher, further and faster than ever before".

Williamson explains that the Tempest could be operated by a pilot, or be flown unmanned (using a virtual cockpit, I think).

Swarming weapons, DEW, virtual cockpit - Def Sec wants Tempest flying alongside F-35 & Typhoon in 2035 #FIA18 #avgeek pic.twitter.com/syJ48XpajS

Heads of terms and contract about to be signed for the Combat Air Strategy and Tempest project. Team Tempest = BAE Systems, MBDA, Lombardo and Rolls-Royce. #FIA18

11.29am BST

Over in Farnborough, Britain's defence secretary has just unveiled a new concept fighter jet to protect the UK in the coming years.

It's called "Tempest", and dubbed a next-generation fighter jet that could eventually replace the Eurofighter.

Defence secretary Gavin Williamson is at Farnborough International Airshow unveiling a sixth-generation fighter jet project to replace Eurofighter Typhoon. A lot of RAF top brass and defence bigwigs waiting with bated breath for the big reveal. Pics to follow. #FIA18

Defence sec Gavin Williamson and chief of air staff Sir Stephen Hillier. pic.twitter.com/eLUlyLIGy3

Defence secretary Gavin Williamson: United Kingdom remains the world leader in combat air.

The UK's new Tempest aircraft #farnboroughairshow a@GavinWilliamsona(C) pic.twitter.com/b59iqrAr5i

We are living in "a dangerous new era" of warfare says a@GavinWilliamsona(C) as he unveils the new "Tempest" fighter jet for the post-Brexit world. pic.twitter.com/AEu5zpn4Fx

10.57am BST

Just in: the Eurozone suffered a drop in exports in May, narrowing its trade surplus with the rest of the world.

However, the euro area's trade surplus with America has grown - which will not please Donald Trump.

10.33am BST

Here's Associated Press's take:

China announced it filed a World Trade Organization challenge on Monday to U.S. President Donald Trump's proposal for a tariff hike on $200bn of Chinese goods, reacting swiftly amid deepening concern about the economic impact of their spiraling technology dispute.

The one-sentence Commerce Ministry statement gave no legal grounds for the challenge or other details. It is an unusually rapid move for a trade case, coming less than one week after the U.S. Trade Representative [USTR] announced the tariff plan, which wouldn't take effect until at least September.

China files WTO challenge to US $200 billion tariff plan. https://t.co/b9i3vywLy2

10.22am BST

This is a swift move by China.

By appealing to the WTO, Beijing is signalling that it won't accept America's proposal to slap 10% tariffs on a wide range of imports - from meat and vegetables to chemicals and consumer products (plus plenty of unusual items).

9.50am BST

Newsflash: China has filed a complaint with the World Trade Organisation over America's latest threat to impose levies on Chinese imports.

According to Associated Press, Beijing is protesting about the plan to hit $200bn of Chinese goods with a new 10% tariff (probably starting in September).

BREAKING: China says it has filed a WTO challenge to Washington's threat to raise tariffs on $200 billion of Chinese goods.

9.41am BST

Tom Rafferty of the Economist Intelligence Unit believes China's economy has held up well despite the trade spat with the US.

However, he also expects growth to slow in the next few months.

"The data shows that global trade headwinds have yet to grip China's economy. Despite the heated global rhetoric around trade and associated financial market volatility, China's export sector performed well in the second quarter of the year and will probably prove quite resilient under the limited tariff actions we anticipate from the US and China.

We are more concerned about slowing domestic demand within China's economy, with investment persistently weak and consumption also having slowed, and these are much more important drivers of growth than exports.

9.32am BST

ING economist Iris Pang has spotted an important detail in today's Chinese growth figure.

China's robot production only grew by 7.2% year-on-year in June, compared to 23% for 2018 as a whole.

China robot production has lose steam with other equipment manufacturing. This shows that exporters are pessimistic. Fiscal and monetary policy supports are vital to keep GDP growth above 6.5%, the government target. pic.twitter.com/EInomMuYrt

9.24am BST

European stock markets are subdued this morning, with the FTSE 100 dipping by 18 points (0.2%) in early trading.

Looking ahead, the Trump-Putin summit could have an impact on risk assets as the US president continues to show a willingness to disrupt the established world order. After calling the EU a 'foe' on trade, European leaders in particular will be wary about just how much Trump cosies up to Putin, which may dampen risk appetite. But at the very least it deflects attention away from Chinese trade wars for the time being.

Asian stocks fell as overnight China GDP data disappointed a touch but we can look through the noise here. There is little change from the last several quarters with growth holding just below the 7% level. The chatter is that trade war concerns are weighing on business confidence but this sounds more like a lot of noise.

8.49am BST

Tusk: Let's not start trade wars

"We are all aware of the fact that the architecture of the world is changing before our very eyes. And it is our common responsibility to make it a change for the better.

Let us remember, here in Beijing, and over there, in Helsinki, that the world we were building for decades, sometimes through disputes, has brought about peace for Europe, the development of China, and the end of the Cold War between the East and the West.

Europe and China, America and Russia, today in Beijing and in Helsinki, are jointly responsible for improving the world order, not for destroying it. I hope this message reaches Helsinki. https://t.co/whPzfDzcfW pic.twitter.com/QmzlvNkkac

8.34am BST

Iris Pang, Greater China Economist at ING in Hong Kong, argues that Chinese policymakers need to do more to boost growth.

She says:

"They need to slow financial deleveraging slightly and to turn their focus more on growth-supportive measures, for example increasing liquidity through (bank reserve requirement) cuts.

"If the situation gets worse a lot faster than what we expect I do think Chinese authorities need to beef up supportive measures, both fiscal and monetary."

China Q2 GDP growth softens as trade row stirs concerns on outlook https://t.co/2RD1g2SAgl pic.twitter.com/67j9KhOHiw

8.21am BST

Although China's growth rate only dipped slightly, it's a worrying sign for the health of the global economy, argues Bloomberg News.

They fear that the 'spillover effects' of China's slowdown could hurt other countries, arguing:

Confirmation that China's economy is slowing amid an escalating trade war is a worrying omen for global growth.

Data released since Friday has affirmed what's been expected for some time: That an ongoing campaign to curtail credit is putting the brakes on the world's second-largest economy. Given that China generates as much as a third of global growth, that's adding to signs that the best world expansion in years is plateauing.

China's cooling economy is a worrying omen for global growth https://t.co/wb2c9XTKVv pic.twitter.com/ryYHQthJNJ

8.18am BST

Louis Kuijs, head of Asia Economics at Oxford Economics in Hong Kong, has warned clients that the trade row between Beijing and Washington could soon cause serious harm to economic growth.

"If the US and China do not resume talks in the next two months or so, the conflict will escalate further, with major economic implications for themselves and the global economy,"

8.11am BST

Investment manager Mario Cavaggioni tweets:

China's economy slowed in line with expectations, signaling broadly stable output as the trade conflict with the U.S. intensifies. GDP rose 6.7% y/y in Q2, the slowest pace since 2016 and down slightly vs 6.8% in Q1. IP, retail sales and FAI also came in close to estimates. (BN)

8.10am BST

Back in April, Beijing told state-owned banks to stop lending so much money to local authorities to fund building projects.

That clampdown is now hitting growth, argues Haibin Zhu, chief China economist at JPMorgan in Hong Kong.

"A main reason for the slowdown is that infrastructure investment began to slow down in the first quarter as the government was trying to control local government debt.

"The good news is that there is space to provide more fiscal support through tax cuts and higher infrastructure investment. We expect they will move along these lines."

8.02am BST

Mao Shengyong, spokesperson for China's National Bureau of Statistics, has told reporters that the Chinese economy made a "good start" to 2018 - despite growth slowing a little in the April-June quarter.

Reuters has more details:

Noting increasing external uncertainties and the fact that China is still going through a critical stage in structural adjustment, Mao said the country would stick to the supply-side structural reform and coordinate efforts to ensure stable and sound economic performance.

7.42am BST

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

China's data had something for everybody. Q2 GDP as expected at +6.7% yoy, though quarterly growth was up (1.8% ann. vs 1.4%). Retail sales accelerated in June but IP decelerated (blue in chart), while investment spending growth also eased a bit to 6.0% yoy. pic.twitter.com/BM9dPHHIHY

#China data dump

Q2 GDP +6.7 pct y/y, +1.8 q/q adjusted (vs +6.7 and +1.6 pct Reuters poll)

June industrial output +6.0 y/y(+6.5 pct poll)
June retail sales +9.0 pct y/y (+9.0 pct poll)
Jan-June fixed asset investmetn +6.0 pct y./y (+6.0 pct poll)

#FTSE100 called to open flat at 7663, Miners likely hindered by China GDP of 6.7% YoY, in-line but the slowest since 2016, as Beijing tries to deleverage and which could worsen with a US-instigated trade war pic.twitter.com/2AujpqupqC

We will release the July 2018 World Economic Outlook Update on Monday, July 16, 10:00am. Watch the #WEO live press conference at https://t.co/0XUacVSx69 pic.twitter.com/a0WX7KXT2l

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