Geopolitical tensions worry markets; UK economic confidence slumps - business live

Graeme Wearden

from on 2019-02-27 17:14 (#49ZZ2)

Rolling coverage of the latest economic and financial news

5.14pm GMT

In the City, the FTSE 100 has closed firmly in the red, down 43 points at 7,107.

4.59pm GMT

Here's CNBC's take on Robert Lighthizer's testimony on the US-China trade dispute:

China needs to do more than just buy more U.S. goods before the two countries strike a permanent trade deal, U.S. Trade Representative Robert Lighthizer told the House Ways and Means Committee on Wednesday.

"If we can complete this effort - and again, I say' if' - and can reach a satisfactory solution to the all-important and outstanding issue of enforceability, as well as some other concerns, we might be able to have agreement that does turn the corner in our economic relationship," Lighthizer said.

3.47pm GMT

Robert Lighthizer's key message to Congress is that a US-China trade deal has to be wide-ranging.

Ie, it must address concerns such as intellectual property theft and the loss of US manufacturing jobs:

"I don't think it should just be a purchasing agreement." - Amb. Bob Lighthizer admits US-China agreement needs to be about more than just buying more Ag products, etc.#trade #China pic.twitter.com/BYzOcjaxl2

Lighthizer: "We have lost -- not all just to China -- but since China joined the WTO, we've lost 5 million manufacturing jobs " It would distress me if that was the result of economic forces. But it's not. It's the result of state capitalism." @CNBC

Lighthizer makes clear the current China talks are just the start of a long process: "I'm not foolish enough to think that there's going to be one negotiation" that's going to completely change China's ways or the U.S.-China relationship.

Trump trade chief Robert Lighthizer has massive support on an aggressive approach to China in the House Ways and Means from both Rs and Ds. If Trump caves to China to juice the stock market, he will face problems in Congress.

3.40pm GMT

In a busy day for geopolitical worries, Greece - the euro zone's perennially weak link - is also back in the spotlight.

In a hotly awaited report the EU Commissioner for economic and financial affairs, Pierre Moscovici - usually a stalwart supporter of all things Greek - had some tough words for the country today.

Concerning #Greece, the second enhanced surveillance report published today shows significant progress but also some areas in which further efforts are needed, and I urge the authorities to complete these in time for the next #Eurogroup

3.31pm GMT

Newsflash: US trade representative Robert Lighthizer has just given the markets a jolt, with a downbeat assessment of the US-China trade war.

Testifying to a Congressional committee, Lighthizer says China represents the most severe challenge ever faced by US trade negotiations.

*LIGHTHIZER SAYS MORE CHINA PURCHASES ALONE NOT ENOUGH FOR DEAL
hello CNH! pic.twitter.com/axDb4VuXDP

Dow down over 150 points as Lighthizer says there is no greater challenge in the trade space than China; purchases alone are not enough for a deal

Shocked face. Lighthizer pouring water on US/China deal.

3.13pm GMT

Just in: US factory orders barely grew in December, rather weaker than expected.

The Commerce Department has reported that orders for US-made goods rose by just 0.1% during the month, while demand for machinery and electrical equipment declined.

Breaking -- December factory orders up 0.1& vs. 0.6% estimate

3.13pm GMT

Michael Cohen's hearing is underway - follow it live here:

Michael Cohen testimony gets under way as Trump's ex-fixer speaks out - live https://t.co/OMHoZelXrq

2.53pm GMT

Geopolitics is also weighing on Wall Street, as trading begins in New York.

2.05pm GMT

In another worrying sign (which I missed earlier) growth in corporate lending within the eurozone has slowed dramatically.

New loans to businesses only grew by 3.3% in January, down from 3.9% in December and sharply below forecasts of 4%.

The narrow money supply measure proved to be an accurate indicator for the Euro area economy in 2018 as the fall in its growth rate was followed by a fall in economic (GDP) growth. It gives us a guide to the next six months and the 0.4% fall in the annual rate of growth to 6.2% looks ominous.

1.00pm GMT

Following this week's Brexit developments, asset manager Columbia Threadneedle reckons the UK is highly unlikely to crash out without a deal next month, Reuters reports.

Columbia's asset management team reckons No-Deal only a 5% probability, down from 10%-20% previously.

#Brexit No Deal odds drop due to Conservative & Labour pivots, Citi says. PM May has changed her stance on an A50 extension allowing an opportunity for MPs to vote for one on March 14, while Labour are now backing a referendum on the Withdrawal Deal as their preferred safety net. pic.twitter.com/OxbNJMDxQ0

12.29pm GMT

After an edgy morning, the UK's blue-chip FTSE 100 index is deeper in the red - down 53 points or 0.75% at 7097.

The EU-wide Stoxx 600 index is down almost 0.5%, with consumer goods, tech, industry and mining sectors falling the most.

The day's geopolitical stew left a bitter taste in the mouths of investors, with a uniform shade of red coating the European boards.

Tensions ahead of the Vietnamese summit between Donald Trump and Kim Jong-un, the lack of tangible progress between the US and China despite the trade talk deadline delay, the ongoing and never-ending Brexit disaster, the prospect of an explosive testimony from Michael Cohen, an aggressive flare-up in relations between Pakistan and India: there were plenty of reasons for the markets to be in a bad mood.

11.59am GMT

Hope that Britain will avoid crashing out of the EU without a deal have pushed sterling to a new 10-month high against a basket of currencies.

The pound just burst through $1.33 against the US dollar for the first time since last July, when Theresa May outlined her Chequers plan, leading to the resignation of Brexit secretary David Davis and foreign secretary Boris Johnson.

++++ Sterling up 1 cent to $1.33, highest since Chequers ++++

11.16am GMT

The drop in Italian consumer morale this month is also a worry - suggesting its recession-hit economy may still be shrinking.

Manufacturing sentiment fell further in February, reaching its lowest level since August 2016. Consumer sentiment also surprised to the downside, with larger than expected decline.
Lack of stabilisation in surveys increases the risk that recession continues into Q2 2019 pic.twitter.com/1NfMFfkANp

10.58am GMT

Back in the City, fashion chain Ted Baker has plunged 11% after hitting shareholders with a profits warning.

It blamed currency moves, and a write-down on old stock. The company was also rocked by the "forced hugs" investigation into CEO Ray Kelvin conduct....

10.38am GMT

Economist Sam Tombs blame the Brexit crisis:

The Economic Sentiment Indicator for the U.K. now is at its lowest level since June 2013. Just look at how it has tumbled since it became clear the Withdrawal Agreement would not be signed off smoothly: pic.twitter.com/98GpC9i90r

10.37am GMT

Here's some reaction to the drop in UK and eurozone economic confidence:

It's the uncertainty that's killing us. Business confidence in the UK drops much lower than the euro area's Economic Sentiment Index in February. pic.twitter.com/nfojL9atUc

Worrying news on #Eurozone as #European Commission reports that #economic sentiment fell for 8th month running in February (albeit slightly) to be lowest since November 2016. #Consumer confidence up & also up for #services & #retail. But #manufacturing & #construction down

Economic sentiment in Ireland rose in Feb, according to the @EU_Commission, after a plunge in Jan, although consumer confidence fell further. EA sentiment slipped again, albeit marginally, but most striking was the fall in the UK, taking it below long run average.

As #Eurozone economic sentiment falls once again, the silver lining is that consumers and the service sector look much better, but manufacturing continues to be the headachehttps://t.co/YOlCBpOepv

10.30am GMT

Just in: Economic optimism in the UK, and across the eurozone, has fallen again as Brexit, trade wars and economic slowdown fears all bite.

The European Commission has reported that economic sentiment in the UK fell sharply last month, hitting its lowest level in over five years.

Economic sentiment in the UK is at the lowest level since June 2013 and is now significantly below the equivalent euro area index. #Brexit uncertainties are weighing on consumers and, in particular, businesses $EURGBP pic.twitter.com/LMf2p0RPns

10.15am GMT

David Madden of CMC Markets confirms that geopolitical tensions are weighing on the City today:

Equity markets are in the red this morning as geopolitics is playing on traders' minds. President Trump is set to meet with the North Korean Leader, Kim Jong-un, to discuss the denuclearisation of the Korean Peninsula. Investors are still wondering when will the US-China trade spat will be resolved.

We heard this week that tariffs on Chinese imports won't be hiked in March, but the trade dispute still needs to be finalised, and we are still a long way from the end result.

10.08am GMT

Emerging markets have been nudged lower since Pakistan announced it has shot down two Indian jets today.

It's not a major selloff, though. The Karachi index is still the worst performer, down over 1%, while India's Sensex is down 0.2%

Geopolitical tension between Pakistan and India have strongly impacted equities from Tokyo to London today, with investors fearing a further escalation.

Almost all European indices are trading in negative territory, especially in Athens and London, where benchmarks are breaking significant support levels. In Frankfurt, the DAX-30 index is still trading inside its short-term bullish trend started at the beginning of this month.

9.51am GMT

Here's the logic behind the M&S/Ocado deal:

Take that #Waitrose...

Ocado shares +4%, M&S -7% (on the money raising) pic.twitter.com/MHm4H2kU5j

Marks & Spencer making fundamental changes to business plan with Ocado JV. Price is a re set dividend and a rights issue to finance. Will be interesting for Ocado customer loyalty switching from Waitrose but early take appears very supportive of this move

Just 24hrs after confirming they're in talks @Ocado / @marksandspencer reveal details of joint venture. M&S paying 750m for 50%, launching Sept 2020 when Waitrose deal ends.
Ocado get holds of M&S customer base details.

Wife (@ocado shopper) wails: 'This is a crisis. I can't afford M&S food for weekly shop. And my mental health can't cope with Waitrose's shonky delivery system. HOW WILL WE EAT?'

@Ocado You'll be losing us as weekly customers with a delivery pass following your decision to dump Waitrose. By comparison, M&S don't provide a full range of lines, no own-brands and their food is too expensive and poorer quality. No thanks. I suspect this won't end well for you

9.31am GMT

Back in the City, shares in Marks & Spencer have tumbled by over 8% after it finally secured a joint venture with online grocer Ocado.

'This deal is a case of the old meeting the new. M&S has clearly decided if you can't beat them, join them, and in a digital age it simply can't afford to ignore the online audience for food.

M&S basket sizes are small, under 30, which makes the economics of online delivery especially challenging, because customers are shopping for special occasions or food for that night, rather than a full weekly grocery shop. By teaming up with Ocado, where basket sizes are over 100, that makes an online proposition viable.

9.05am GMT

US stock markets are also expected to be subdued, with the Dow Jones industrial average being called down over 100 points (or 0.4%).

Fed chair Jerome Powell failed to provide many fireworks in his testimony to the Senate yesterday, as he pledged to be patient before considering further interest rate hikes.

Dow futures point to lower open ahead of Trump-Kim summit https://t.co/d7o3RJnGzR

8.38am GMT

European stock markets have opened lower, with the Stoxx 600 index dropping by 0.36%.

Tensions between India and Pakistan have escalated in Kashmir. This sort of event can often lead to a short reaction in financial markets, but the consequences are largely confined to the countries concerned and have limited lasting effect.

8.37am GMT

Anit Mukherjee, a former Indian Army major and assistant professor at the S. Rajaratnam School of International Studies in Singapore, has told Bloomberg News that the clashes in the disputed Kashmir region are very worrying:

"This is unprecedented territory, we haven't had tit-for-tat air strikes between India and Pakistan since the 1971 war,"

"We don't know what will come from this. But it seems like Pakistan has given a response. And there have been casualties - captures, deaths."

8.29am GMT

8.12am GMT

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

After yesterday's surge in sterling, the City is rather more subdued this morning as investors return to worrying about geopolitical issues.

Indo-Pak air combat over LoC. Unclear which side has shot down whose fighter jet/helicopter, but plane debris is shown by Indian TV channels- helicopter or fighter jet, Indian or Pakistani. Surely Gov needs to speak.

As I feared. Sounds like #Pakistan has retaliated to #India airstrikes by launching their own strikes and may have shot down Indian plane. Two nuclear armed antagonists allowing this to escalate uncontrollably

Meanwhile, KARACHI stock exchange KSE100 Index fell by +1100 points #Pakistan #PakistanArmy #markets pic.twitter.com/UVRgrOxq9T

The remarkable allegations by Cohen go further than what has been made public thus far by the special counsel investigation into potential collusion between the Trump campaign in Moscow.

Cohen will also suggest his instructions to lie to Congress about a possible Trump Tower deal in Moscow during the 2016 campaign came from the president - albeit not directly.

While the Pound is likely to extend gains amid the current optimism, the question if for how long? It is quite frightening how sensitive and explosively volatile the Sterling has become to Brexit headlines, and this is likely to intensify as the March 29 deadline looms.

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