Stock markets rally on trade hopes, but UK retail sales fall - as it happened

Rolling coverage of the latest economic and financial news

• Latest: China 'offers to ramp up US imports'
• UK retail sales fell 0.9% in December
• Have we reached 'peak stuff'?

Earlier:

• WSJ: Steven Mnuchin proposed cutting China tariffs
• Treasury denies it, but stocks rise
• China cut taxes to spur demand

5.19pm GMT

Trade optimism has swept the UK stock market to its highest closing level in six weeks.

The FTSE 100 ended a wild week with a near 1% gain, closing 133 points higher at 6968.

European Closing Prices:#FTSE 6968.33 +1.95%#DAX 11205.54 +2.63%#CAC 4875.93 +1.70%#MIB 19708.06 +1.22%#IBEX 9069.1 +1.80%

4.37pm GMT

Beijing's offer to boost US imports was made at the start of January, according to Bloomberg.

Amusingly, US officials are apparently unconvinced by the (undoubtedly challenging) plan.... and also want China to do even better!

The offer, made during talks in Beijing earlier this month, was met with skepticism by U.S. negotiators who nonetheless asked the Chinese to do even better, demanding that the imbalance be cleared in the next two years, the people said.

Economists who've studied the trade relationship argue it would be hard to eliminate the gap, which they say is sustained in large part by U.S. demand for Chinese products.

4.02pm GMT

Bloomberg is reporting that China has offered to ramp up its purchases of U.S. imports over six years to reach more than $1 trillion per year.

They're citing officials familiar with the negotiations.

LATEST: China has offered to go on a six-year buying spree to ramp up imports from the U.S., in a move that would reconfigure the relationship between the world's two largest economies https://t.co/mmXAk9KAMd

2.39pm GMT

As stocks rise on Wall Street, Jasper Lawler of London Capital Group says the markets are "hanging on every headline" about the US-China trade talks.

This would not be the first time that we have heard reports of thawing trade tensions. The markets have been here before, so there is going to be a level of caution.

That said, the jump higher reflects the extent of the damage trade tensions are causing from the markets view. Any evidence that the US and China are close to a trade agreement will result in a sustained move higher in riskier assets.

2.38pm GMT

Ding ding! The New York stock market is open, and shares are catching an early bid.

Those (disputer) reports that Treasury secretary Mnuchin wants to ease tariffs on China helped to push the Dow Jones industrial average up by 0.7% at the open, a gain of 160 points to 24,530.

BREAKING: S&P 500 index exits correction territory at the opening bell, rising about 0.5% https://t.co/tCz3BLbkhY

1.52pm GMT

US Opening Calls:#DOW 24493 +0.51%#SPX 2646 +0.38%#NASDAQ 6743 +0.34%#IGOpeningCall

1.14pm GMT

Wall Street is expected to rally today, picking up where it ended last night.

Ahead of the opening bell:
- Dow up 159 points
- Nasdaq up 33.5
- S&P up 12.55
- @RealMoney #StockoftheDay $NFLX down 3.3% pic.twitter.com/WSFLomBXc6

It was a week defined by Brexit drama, US-China trade developments and ongoing political uncertainty in Washington.

Renewed optimism over US-China trade talks stimulated global risk sentiment on Friday with Asian stocks ending mostly higher. Although European markets are benefiting from the improved market mood, investors must remain alert and guarded.

12.53pm GMT

2019 just turned into a grim new year for thousands of Tesla workers.

"Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months.

"Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity, but succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.

Related: Tesla to cut more than 3,000 jobs because cars 'still too expensive'

12.31pm GMT

Back in the City, stocks are rattling higher as investors cling onto optimism of a trade war breakthrough.

The FTSE 100 index of blue-chip shares has now leapt by 1.5%, or over 100 points, to 6,943.

Christmas Eve was the worst in recorded history for stock markets, followed by the largest move in percentage terms for stocks since 2009 two days later. But with heightened volatility comes opportunity for active investors, and we believe it makes sense to put some risk back on the table.

12.28pm GMT

Ian Gilmartin, Head of Retail & Wholesale at Barclays Corporate Banking, reckons it's too early to say exactly how Christmas went for UK retailers:

It's a complicated trading environment, with comparisons remaining difficult due to a constantly evolving discounting season. Although the industry will certainly have been hoping for a stronger December overall, there were some winners out there and it's important to caution that we need to see January's data before we can entirely judge the festive sales period.

Brexit uncertainty is weighing on consumer confidence and making it difficult for retailers to plan for the future, but they have to simply get on with it and try to influence the factors within their control; retaining a focus on product innovation, controlling costs and making sure their online and physical platforms complement each other and boost sales."

12.00pm GMT

Here's my colleague Richard Partington on the retail sales data:

Related: UK shoppers rein in spending as fears grow over economy

11.57am GMT

Richard Potter, CEO of retail AI firm Peak, has spotted an interesting line in the retail sales data -- people bought more bargains than ever before in December.

"The volume of goods purchased at a discounted rate stands at an all-time high. Some might say this is self-harm given the big margin squeeze we're seeing retailers struggle to unlock.

It's a fact that for many high street retailers the cost to fulfil an online order is higher than in store. So couple this with the Brexit effect one thing is for sure, retail has a transformational year ahead."

11.00am GMT

The slowdown in retail spending may also show that materialism is fading, and some consumers simply don't need more things in their lives.

Andrew Westbrook, head of retail at audit, tax and consulting firm RSM, thinks we may have reached 'peak stuff'

There is undoubtedly significant distress on the high street with retailers having to compete through heavy discounting to gain their fair share of the market, leading to pressure on margins and profitability.

For the retailers that struggled over Christmas, the pressure will now be on to convert stock into cash ahead of the quarterly rent payment date which falls at the end of March.

10.30am GMT

The retail sales report also highlights the move away from high streets, and onto e-commerce sites, with one in five pounds spend online in December.

Ian Geddes, head of retail at Deloitte, says:

A record proportion of sales were made online over this period: 20% of overall sales, making December 2018 the most digital Christmas ever.

It is worth acknowledging that the period includes Cyber Monday, the biggest on record, which may have boosted overall sales and could explain why December had a slow start for many retailers. This slowdown highlights a shift in consumers making many of their Christmas purchases before December.

9.53am GMT

Jeremy Thomson-Cook, Chief Economist at WorldFirst, argues that a cocktail of factors - including Brexit - are to blame for the slowdown in spending:

"Retailers have learnt that Christmas is not just a December phenomenon and we must look at the performance of the UK High Street in both November and December for a better idea as to just how much pressure the retailing sector is under. Over the course of the 4th quarter, retail sales has fallen by 0.2%.

Everything from lower consumer confidence, Brexit fears, higher interest rates, currency fluctuations, slowing consumer credit take-up and business rates made 2018 a really tough year for retailers and 2019 could easily repeat such pain.

9.52am GMT

December's UK retail sales are even worse than expected, says David Madden of CMC Markets, especially if you strip fuel out.

UK retail sales MoM (December): -0.9% vs -0.8% expected, prior 1.3% (revised from 1.4%)

UK retail sales excluding fuel MoM (December): -1.3% vs -0.6% expected, prior1% (revised from 1.2%)

UK retail sales fell -0.2%q/q in the final quarter of 2018, indicating that the retail sector took -0.01% off GDP growth in Q4. Fall across the board apart from household goods stores (1.6%q/q) and fuel (2.1%q/q). pic.twitter.com/RwXxGb9LoE

Today the @ONS has released figures on retail sales growth in December and it does not look good.

Read why it's all about consumer debt in my piece from last week: https://t.co/6ap10PwtmF

9.48am GMT

All main sector spend, except for food and fuel, declined in December 2018 - a month-on-month decrease of 0.9% https://t.co/KA94JJNrJ5

9.45am GMT

Here are the key points from the retail sales data, just released (and online here)

9.41am GMT

Newsflash: UK retail sales fell in December as shoppers reined in their spending.

Retail sales volumes declined by 0.9% month-on-month in December, new figures from the Office for National Statistics show.

"Following the increased growth in November, where shoppers snapped up more Black Friday offers as they continue to bring forward their Christmas shopping, retail sales weakened in December."

"Retail sales fell back slightly in the last three months of 2018 with only petrol stations seeing significant growth.

9.01am GMT

Mnuchin's apparent offer of help to China comes just a few days after Beijing announced it would cut taxes to help businesses, many of whom are struggling in the trade war.

Related: China unleashes tax cuts in bid to halt economic slowdown

8.32am GMT

Airline stocks aren't joining today's rally, after Ryanair hit shareholders with another profits warning.

Related: Ryanair issues profit warning as winter fares fall

8.30am GMT

A trade war breakthrough may be coming, but it won't be coming at Davos next week.

President Donald Trump has cancelled plans to send US officials, including treasury secretary Mnuchin and trade representative Robert Lighthizer, to the World Economic Forum.

Related: Trump intensifies feud with Pelosi by calling off her trip abroad

8.22am GMT

European stocks have opened higher, hitting their highest level since early December....

8.10am GMT

Optimism over the US-China trade talks have pushed commodity prices to their highest levels in months.

The most traded iron ore on the Dalian Commodity Exchange gained 3.2% to close at 528 yuan ($78.01) a tonne, just below the day's peak of 530 yuan, its highest since early March last year.

"The signs out of the recent trade talks in China are promising and have boosted market optimism, despite the lack of concrete outcomes," ANZ Research said in a note.

8.02am GMT

Stocks jumped across the Asia-Pacific region overnight, following the WSJ's report.

China's benchmark Shanghai Composite rallied by almost 1.5%, with Japan gaining 1%.

7.49am GMT

Investors are hopeful that Steve Mnuchin could calm the trade war, says Adam Cole of Royal Bank of Canada:

Optimism of trade policy again dominates overnight price action, with a report in the Wall Street Journal that Treasury Secretary Mnuchin (a free trade proponent, in contrast to Lighthizer and Trump) has proposed easing tariffs on China to support markets.

The Treasury denied the report, but stock futures are still 0.3% higher.

7.35am GMT

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

U.S. officials are debating ratcheting back tariffs on Chinese imports as a way to calm markets and give Beijing an incentive to make deeper concessions in a trade battle that has rattled global economies.

"No new tariff decisions have been made.

We are focused on the current 90 day period and the expected high level visit by China Vice Premier Liu He at the end of this month."

Officials deny report Mnuchin proposed lifting China tariffs https://t.co/6IRB67xhme

Good morning and happy Friday ... European stock markets called to open higher as risk sentiment is boosted by reports US Tres Sec Steven Mnuchin was considering the idea of lifting some of even all of extra tariffs on Chinese imports to facilitate trade negotiation with China https://t.co/E2X7w9nwjc