Trade tensions rise

31 Aug 2018

Trade tensions rise

Bloomberg cites six sources that say US President Donald Trump plans to push ahead with imposing tariffs on a further $200bn of imports from China as soon as the public comment period ends next Thursday (September 6).

In a separate interview yesterday – also with Bloomberg – the President reportedly smiled and said it was “not totally wrong” when asked about the plan. He also threatened to pull out of the World Trade Organisation “if they don’t shape up” and described the EU’s offer for a reciprocal scrapping of automobile tariffs as “not good enough”. Fears that trade tensions could be ratcheted up saw lower closes on Wall Street yesterday, with the S&P 500 down 0.4%.

UK data

This morning saw mixed outturns in two UK data releases. Firstly, GfK consumer confidence was better than expected with the index rising to -7 in August from July’s reading of -10. Market expectations had been for a steady figure of -10 (Investec -12). Supporting the rise in confidence this month was an improvement in consumer perceptions over their own personal financial situation, as well as the ‘major purchases index’. Gfk notes that they suspect consumers were likely taking a wait and see approach given all the noise around Brexit. Secondly, Nationwide house price data for August was disappointing, with house prices falling 0.5% on the month, taking the annual rate of house price growth down to 2.0%.

Chinese data

Chinese PMIs were slightly better than expected in August, which may ease some concerns over the pace of Chinese growth in the second half of this year. The official non-manufacturing PMI rose to 51.3 from 51.2 in July (consensus 51.0). Meanwhile the manufacturing PMI also strengthened on the month to 54.2 from 54.0 and against a consensus 53.7. Asian equities, meanwhile, are relatively unperturbed given the better-than-expected official Chinese PMIs, with the Nikkei flat and the Shanghai Composite just 0.2% lower.

Dollar gains as Argentina turbulence sparks further jitters

EM market jitters came back to the fore yesterday with both Argentina and Turkey generating negative headlines. In Turkey, the news that the Deputy governor of the central bank was stepping down, along with announcement of increased taxes on foreign currency deposits saw the EURTRY rate trade above 8 for only the 3rd time since the recent crisis emerged. So far, the Turkish central bank’s refusal to hike rates to prop up their currency has been blamed as one of the main reasons that concerns over the single currency have continued to drag….

….however, after watching the Central Bank of Argentina unsuccessfully attempt to prop up their currency economists may be forced to reassess their theories on EM mon pol. Until yesterday, the peso had dropped 22% since the start of August. The currency’s slide prompted the central bank to announce a 15% rate hike, upping the base rate from 45% to an eye watering 60%. However the shock and awe approach was counterproductive, spooking markets even further and leading to a further 20% slide in the peso against the dollar.

The knock on effect of the refocus on EM has been a drop in risk sentiment which has boosted the dollar. While safe havens like the Swiss franc and Yen have benefited, the dollar has been the biggest benefactor. The greenback ended a 2 week slide yesterday which had seen it give up almost 3.5% against the Euro since the middle of August.
INM – H118 results first glance

INM has this morning released its H118 results. The group has reported revenues of €95.0m, representing an annual decline of 4.1% from a restated €99.0m in H117 (the restatement relates to the recognition of revenue and costs from the distribution of third party material and has no impact on net profit or net assets, but H117 revenue has reduced by €49.1m from the initially reported figure). Ongoing structural pressures in its core publishing business countered the benefit from the Hegadon and Reachmount acquisitions completed in the period. The group has continued to cut operating costs in response to falling revenues, with underlying operating profits coming in at €11.4m (€14.5m in H117). Net exceptional charges totalled €2.1m in the period, mostly relating to legal costs and restructuring. Ongoing profits have helped to further strengthen the balance sheet. Net assets climbed to €88.6m from €76.1m at end-FY17. Within that, net cash balances stood at €89.4m (end-FY17: €91.5m), as profits offset acquisition spend of €5.3m and pension related cash outlays of €7.3m. The pension deficit was €66.5m at end-June, down from €77.5m at end-2017.

Economic releases

10.00     EC GDP (Q2)
13.30     US Non-farm payrolls
13.30     Unemployment