US-China trade truce drives Wall Street to record closing high - as it happened
Trade optimism is pushing markets up despite weak factory data in the UK, the eurozone and China
- Latest: US stock market hits new peak
- But can rally last, given manufacturing weakness?
- UK factories suffer slump in June
- US, China and eurozone manufacturing also weak
- Introduction: US-China trade breakthrough
- Analysts: Xi-Trump deal is cheering investors
9.05pm BST
Boom! America's S&P 500 index has closed at a new alltime high, although today's rally did fade by the end of the session.
Wall Street investors have given a steady thumbs-up to Saturday's news that China and the US will resume trade talks.
8.56pm BST
Michael Wilson, equity strategist at Morgan Stanley, has warned investors not to get carried away by the trade war ceasefire.
As he points out in a note to clients, there are other problems on the horizon - including signs of slowing growth.
"A pause in rising trade tensions is not a fix for slowing U.S. economic activity and earnings pressure.
In November, a truce brought a short-lived rally to the S&P, but ultimately induced procurement managers to cancel orders as inventories were already high and there was no longer an incentive to stockpile ahead of incremental tariffs."
7.10pm BST
Today's weak factory PMI reports from across the globe show that global manufacturing contracted for the second consecutive month in June.
Two months of contraction in global trade has not happened in six-and-a-half years, according to the J.P. Morgan Global Manufacturing Index, points out Bloomberg. More here.
Global factory output contracts for the first time in 80 months https://t.co/1XLEJKXlSZ pic.twitter.com/V6suL7zVKI
5.53pm BST
Our news story on today's market action is now live, here:
Related: Global markets rally as hopes of US-China trade deal rise
5.28pm BST
Here are some photos of traders on the the floor of the New York stock exchange, as stocks hit record highs today.
5.18pm BST
Back in London, City investors shrugged off today's weak factory data - taking comfort in the US-China trade detente.
The FTSE 100 ended the session 71 points higher at 7,497, a gain of almost 1%. That's its highest close in over two months, going back to late April (before the May selloff).
4.44pm BST
This is not encouraging:
World manufacturing PMI declined for a 14th straight month, to 49.4 in June. Longest decline on record, to the lowest level since October 2012. pic.twitter.com/vG8AIjoqRv
4.41pm BST
There's a sharp contrast between the optimism in the markets, and the struggles in the world's factories shown in today's PMI data:
Fawad Razaqzada, Market Analyst at Forex.com, suspects the rally may fade:
The US-China trade optimism is driving the markets and the S&P 500 has opened at a fresh record, while safe havens gold, yen and franc have all fallen. Tech stocks jumped after Trump said he would allow US corporations to resume business dealings with Huawei on certain products after it was blacklisted earlier due to national security concerns.
But July has started with a negative note for global manufacturing data, after purchasing managers reported deteriorating conditions in several key economic regions including China and the US. Initially, this was shrugged off by a market buoyed by the latest developments regarding the US-China trade spat, after Trump said trade talks are back on track. However, since the start of the US session, we have seen a bit of a pullback from the highs. If this latest trade optimism fades completely, the focus will turn very quickly to the ailing global economy. As such, the S&P's latest breakout to a new all-time high could be brief, especially as some of the positivity regarding trade talks was already priced in.
4.14pm BST
Wall Street is holding most of its early gains, with graphics card and chipmaker Nvidia among the risers (+2.5%).
STOCKS NOW:
- Dow up 185.12
- Nasdaq up 97.20
- S&P up 25.30
- #StockoftheDay $NVDA up 3.11% pic.twitter.com/wbOhzDHeP5
3.35pm BST
A second survey of US manufacturing has confirmed that growth was subdued last month:
ISM Manufacturing falls to 51.7, lowest level since September 2016. pic.twitter.com/DSKb93kRsp
2.52pm BST
Donald Trump's trade war has hurt US manufacturing, warns Markit's chief economist Chris Williamson.
Here's his take on today's PMI survey, which is quite a contrast to the booming markets.
Although business optimism about the future lifted slightly higher, it remained close to survey lows to indicate persistent low morale. Worries centred on signs of slowing demand both at home and internationally, weaker sales, and geopolitical uncertainty.
"Tariffs meanwhile continued to push up prices, but weak demand often limited the ability of firms to pass higher prices onto customers, suggesting overall inflationary pressures have weakened compared to earlier in the year."
2.51pm BST
Just in: America's manufacturing sector barely grew last month -- but that's still good by global standards!
Data firm Markit has just reported that US factories remained in "near-stagnation" in June, due to weak output and cautious hiring.
The rate of overall growth held close to May's near-decade low. On a positive note, the rate of output growth quickened slightly amid a renewed rise in new orders.
However, in line with muted increases in output, firms reined in staff hiring, expanding workforce numbers at the slowest pace for almost three years. Subsequently, output expectations remained subdued.
Better than expected for the Markit PMI but the chart still isn't a pretty picture pic.twitter.com/0QAMZvjYgV
U.S. June Manufacturing PMI 50.6 vs flash reading 50.1. That's up from 50.5 in May, but a year ago it was 55.4.
Nothing to change the narrative. https://t.co/eb6kP8y7B5
2.42pm BST
America's technology-focused Nasdaq index is really on a charge -- up a beefy 1.7% at the start of trading.
That reflects relief that Washington and Beijing have agreed to resume trade talks, as tech companies were vulnerable to tariffs and other sanctions.
2.37pm BST
The Dow Jones industrial average has also jumped 1% at the start of trading, gaining 264 points to 26,864.
2.35pm BST
Boom! The New York Stock Market has hit a fresh record high at the start of trading.
2.24pm BST
Here's another chart showing how the world's factories have slowed sharply in recent months, with many now contracting (with a PMI below 50).
Global Manufacturing PMI 7/12 countries listed now below 50 pic.twitter.com/JCRuzAkPZI
2.18pm BST
Shares in Apple are expected to rally today too, thanks to trade optimism.
Apple shares getting a big boost in the premarket after Trump and Xi agreed to a trade truce over the weekend $AAPL pic.twitter.com/vZ4dIjHuoL
1.54pm BST
Soybean prices have hit a one-year high in Chicago, following the news that China and the US will restart trade talks.
1.32pm BST
Today's PMI report shows that business optimism among factory bosses has dropped this month, dragged down by "Brexit uncertainty and softer global and domestic economic growth".
As such, Boris Johnson and Jeremy Hunt's pledges that they're prepared to take Britain out of the EU without a deal on 31 October aren't helping.
"Given this outlook, increasing competition to see who can race to the bottom and act tough on 'no deal' is the height of irresponsibility with zero understanding of the consequences."
Related: Johnson and Hunt's no-deal Brexit pledges blasted by business leaders
1.06pm BST
Rebecca Long Bailey MP, Labour's Shadow Business Secretary, has blamed the government's mismanagement of Brexit for the slump in factory growth.
She says:
"The Government's mishandling of Brexit, and above all the reckless threat of No Deal, has pushed UK manufacturing to a six year low, with consecutive months of falling production.
Only Labour will deliver a comprehensive Industrial Strategy and the long-term investment needed to revitalise the UK's manufacturing base."
The "fiscal firepower" we have built up in case of a No-Deal Brexit will only be available for extra spending if we leave with an orderly transition. If not, it will all be needed to plug the hole a No Deal Brexit will make in the public finances.
Related: Hammond warns Johnson and Hunt over spending promises
12.33pm BST
The stock market rally has now driven the UK"s FTSE 100 index up by exactly one hundred points, or 1.35%, to 7,525 points.
That's its highest level in nearly 10 weeks, as the threat of a deeper US-China trade war fades.
12.18pm BST
Britain isn't the only country whose manufacturing sector has weakened in recent months.
As this tweet shows, most factory PMIs have fallen in recent months -- as bosses have reported slowing output and order growth.
Table of Manufacturing PMIs.
From mostly green (expansion) to mostly red (contraction) in one year. pic.twitter.com/PUL1b4OR3J
11.50am BST
Wall Street could hit a fresh record high today -- which I'm sure Donald Trump would hail as a sign of progress on his watch.
11.21am BST
The US stock market is expected to cheer the US-China trade truce when it opens, in just over three hours time.
The Dow Jones industrial average is tipped to gain around 250 point, or 1%, following the strong gains in Europe and Asia (where Japan and China's markets both gained over 2%).
Dow futures surge more than 250 points after Trump and Xi agree not to impose more tarriffs https://t.co/LqVZAxZql2 .@CNBCi .@CNBCnow #ChinaUS #trade #tradewar
11.01am BST
Several experts are warning that the prolonged period of uncertainty over the UK's exit from the European Union dragged the factory sector down last month.
Seamus Nevin, Chief Economist at Make UK, the manufacturers' organisation, says:
"Today's data proves that May's plunge below the 50-threshold was not just a one-off with UK manufacturing activity collapsing to its lowest level in six and a half years.
Businesses are cutting back on both day-to-day and capital spending with the contraction in output a reflection of growing Brexit uncertainty and, worsening global trade winds.
Not only have manufacturers had to grapple with a prolonged period of uncertainty around Brexit, which has clearly impacted and delayed much needed investment decisions, but they also find themselves in the crosswinds of weakening demand from both home and overseas markets.
With production and new order flows falling last month, the sector is increasingly looking to Westminster for the clarity they crave on the future relationship with the EU."
"The UK's manufacturing sector is experiencing historic lows in investment. New products and ideas are not being invested in to the extent that they were three years ago. The highs the sector saw in the first quarter of 2019 were clearly to mitigate Brexit issues, with many stockpiling to avoid or reduce delays to lead times and to manage customer expectations.
"Right now UK manufacturers need certainty, however, at the moment there's a high probability of a no-deal Brexit. The UK's makers need to start preparing for this eventuality, if they haven't done so already."
10.57am BST
Eurozone government bonds are also strengthening today, as relieved investors drive asset prices higher following the US-China trade truce.
This is driving prices higher, pushing down the yield (or interest rate) on the bonds.
Italian 10Y BTP yield below 2%! pic.twitter.com/TWR8FVPZQ2
10.38am BST
Britain's stock market is continuing to rally, despite the decline in factory output last month.
The FTSE 100 is holding firmly onto this morning's two-month high, currently up 82 points at 7,508 points.
The much anticipated Trump-Xi Jinping meeting in Osaka delivered as expected, not a full on resolution of the trade dispute between China and the US but some form of truce that includes picking up the broken off trade negotiations between the two countries.
For the time being the existing import tariffs will remain in place but the markets will live off the hope that the resumption of the discussions between US and Chinese trade representatives will help lift those sooner rather than later.
10.17am BST
Better news: Unemployment across the eurozone has hit a fresh 11 year low, dropping to 7.5% in May.
Statistics body Eurostat also reports that jobless levels fell in almost every member of the EU (only Denmark saw an increase, from 5% to 5.1%).
Euro area #unemployment down to 7.5% in May; lowest rate since July 2008. EU at 6.3% - lowest since the start of the series https://t.co/UGeIU1Q0ro pic.twitter.com/HowJfbkbuA
10.08am BST
The decline in UK factory output in June has driven the pound down to a 10-day low.
Sterling has shed half a cent against the US dollar to $1.2639, its weakest point since 20 June.
9.57am BST
In another worrying sign, UK consumer credit growth has slowed to a five-year low.
The Bank of England reports that unsecured lending to consumers only grew by 5.6% per year in May, down from 5.9% in April
Today's macro data are a deluge of negative news for British economy.
Manifacturing #PMI plunged to 48.0, much more than exp 49.2. But most of all there is a real collapse in lending activity with BOE consumer credit falling more than 15% and net lending to individuals pic.twitter.com/Hz74ouTf6w
9.47am BST
Rob Dobson, director at IHS Markit, says Brexit is hurting UK factories for two reasons:
"The downturn in UK manufacturing deepened during June, as the impact of firms unwinding stockpiles built before the original Brexit date continued to reverberate through the sector and exacerbate weak demand.
"The stranglehold of sustained Brexit-related uncertainty and disruption also weighed heavily on business confidence and employment, as optimism ebbed to one of its lowest levels in the survey history and staff headcounts were reduced for the third straight month.
9.44am BST
Worryingly, UK factories don't have enough orders to help them quickly plough through their inventory stocks.
Worse to come? Forward-looking UK #manufacturing orders-to-inventory ratio fell sharply in June, down to its lowest for seven years and the second-lowest since February 2009, suggesting rate of output decline is likely to accelerate into the third quarter. pic.twitter.com/1FHR9Ywpd5
9.40am BST
It's fairly obvious what UK manufacturers blamed for the loss of orders in June (based on anecdotal replies collected in the latest PMI survey) .... pic.twitter.com/w8Yt6iJ3a8
9.38am BST
Newsflash: Britain's factory sector has suffered its sharpest contraction in six years.
Data firm Markit's UK manufacturing PMI, just released, is much worse than expected. The index has slumped to just 48.0, a 76-month low, showing that the sector shrank at a more rapid pace.
The UK manufacturing sector continued to feel the reverberations of the unwinding of earlier pre-Brexit stockpiling activity during June. The already high stock levels at both manufacturers and their clients led to a scaling back of output and new order intakes, with demand from both domestic and export markets weakening.
Output was lowered in response to reduced intakes of new business, which fell to the greatest extent for almost seven years. There were reports that high stock levels, ongoing Brexit uncertainty, the economic slowdown and rising competition all contributed to the decreases in new orders and production.
9.33am BST
Some City experts are sceptical about quite how much progress was made between the US and China at the G20 summit.
Although Donald Trump talked up his meeting with Xi Jinping as a big success, we still don't know how Beijing and Washington will resolve their trade conflict. The two sides also haven't set any public deadlines.
The fact that China and the US are restarting trade talks gives some reassurance to investors and triggers a small rally in stocks around the world. However, there are plenty of other negative factors to consider which explains why equity markets aren't experiencing massive surges.
"The trade war is far from over, which means a continuation of uncertainties hanging over the market.
"In the big picture, it doesn't change anything. It was never likely to solve the whole problem, but it's a useful stepping stone."
"So the can was kicked down the road... but [there is] much more work to do on the details of a future stickable agreement,"
9.29am BST
Economics professor Nouriel Roubini is concerned by the eurozone factory downturn:
Eurozone's manufacturing sector is already in a recession... https://t.co/9G2qKfx9Of
"Eurozone manufacturing remained stuck firmly in a steep downturn in June, continuing to contract at one of the steepest rates seen for over six years.....
The downturn is also showing no signs of any imminent end. The survey's forward-looking indicators remained worryingly subdued in June, adding to concerns about the economy in the second half of the year."
9.10am BST
Newsflash: Europe's factory sector continued to contract last month, taking the shine off today's market rally.
Data firm Markir reports that its Eurozone manufacturing PMI report, which tracks thousands of firms, fell to a three-month low of 47.6 in June, from 47.7 in May.
8.41am BST
Ouch! Spain's factory sector suffered a sharp contraction last month, with orders and output dropping.
Data firm Markit blames "deteriorating market conditions, both at home and abroad" -- a sign that the eurozone slowdown, and months of trade tensions, are hurting.
Spain Manufacturing PMI also into negative territory in June, ai to 47.9 (May: 50.1), as factory output fell amid weakening demand conditions at home and abroad. More here: https://t.co/r9DXSOYDWZ pic.twitter.com/HaJaPz8O4v
8.39am BST
Every European stock index has surged higher this morning, following the rally in Asia overnight.
Though they have been here before, the global markets proved ready and willing to swallow the latest trade war retreat from the USA and China.
The much-anticipated G20-sidebar between Donald Trump and Xi Jinping didn't disappoint. According to the US President trade negotiations are now 'right back on track', Trump then pledging that he won't be adding additional tariffs onto Chinese goods - 'for the time being'.
8.19am BST
The Stoxx 600 tech index, which tracks Europe's technology sector, has jumped 2.2% this morning to its highest level in more than a year.
8.14am BST
European stocks are also surging in early trading.
Germany's DAX index, which is stocked with major exporters, has leapt by 1.8% to its highest level since August 2018.
8.08am BST
Boom! Britain's FTSE 100 index has hit its highest level in over two months, at the start of trading in London.
The index of top blue-chip shares has gained 75 points, or over 1%, to 7,500 points -- its highest level since 24th April.
8.00am BST
Investment bank Jefferies agree that the cessation of US-China trade hostilities should be taken well by markets:
For investors sipping their Sunday morning coffee and perusing the weekend newspapers, the 180-degree tilt in US-North Korea relations probably edged out the 45-degree turn in US-China trade relations in terms of attention.
The fact that President Trump announced that he would not be adding tariffs on US$300bn worth of Chinese imports and that trade talks would resume will be a relief for financial markets. The surprising U-turn that US companies will be able to continue to sell to Huawei has been regarded as a significant concession.
7.53am BST
The trade truce can't come soon enough for China's factories, who have suffered falling orders and output in June.
Manufacturing production across China slumped into contraction last month, according to the latest survey of purchasing managers across country.
Companies responded by reducing headcounts further and making fewer purchases of raw materials and semi-finished items. At the same time, selling prices were raised following another increase in input costs, though rates of inflation were negligible.
Business sentiment was broadly neutral at the end of the second quarter, with firms mainly concerned about the US-China trade dispute.
China manufacturing PMI declined more than expected in June to 49.4 and thus returned to contraction. Highlights difficulties authorities have in stimulating the economy as trade wars bite. New rounds of monetary easing are likely #macrobond pic.twitter.com/EGe4fhhH1j
7.45am BST
Robin Bew of the Economist Intelligence Unit doesn't believe the US-China ceasefire will hold for very long, given the underlying tensions between the two sides.
Our team had predicted the #US #China trade ceasefire at the #G20, mainly because it suits Trump's political purposes (avoids further hobbling of economy in run up to election, allows for photogenic handshake). But underlying tensions remain. Expect things to worsen after 2020
7.41am BST
Mark Haefele, chief investment officer at UBS Global Wealth Management, predicts that the trade war ceasefire could last for several months.
"We expect talks to continue over the coming months, with the most likely outcome - as we previously expected - a prolonged truce on trade.
Both sides have strong incentives to avoid further rounds of retaliation. However, we also believe neither side is in a rush for a deal. Both Presidents Trump and Xi appear to be calculating that they have strong cards to play."
7.36am BST
GLOBAL MARKETS-Stocks enjoy relief rally in Asia, bonds retreat - Yahoo Finance
7.32am BST
Japan's Nikkei index has closed at a two-month high, driven by optimism over the US-China trade truce.
After spending the better part of two months in trade war purgatory and with G20 done and dusted, risk markets have responded to Saturday's events in a reveller tone.
Indeed, investors heaved a massive, but exhausted, sigh of relief that both the U.S. and China opted to push the reset button and restart trade negotiations amidst other pleasantries - now we'll have to see, whether it all sticks.
7.17am BST
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"We will continue to negotiate, and I promise that at least for the time being we won't be adding additional [tariffs].
We're going to work with China to see if we can make a deal. China will consult with us and will be buying a tremendous amount of food and agricultural products, and they're going to start doing that almost immediately."
Related: US-China trade talks back on track, says Trump
Related: White House insists Trump Huawei reversal not 'catastrophic mistake'
European Opening Calls:#FTSE 7493 +0.91%#DAX 12577 +1.44%#CAC 5593 +0.98%#MIB 21498 +1.24%#IBEX 9294 +1.03%
The compromise reached between Trump and Xi at the week's G20 meeting went further than most had expected, with Trump putting the next tranche of tariffs on hold and reopening US companies' ability to supply Huawei.
It is not clear, however, whether the latter will clear congress and there is plenty of scope for trade talks to break down again in the future. For now, however, risk is well supported.
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