Markets boosted by US government shutdown deal and trade war hopes – business live – The Guardian

Markets boosted by US government shutdown deal and trade war hopes – business live – The Guardian

Heads-up. Bank of England governor Mark Carney will be speaking in London shortly, about the world economy, and key risks to the global outlook.

Financial Times Live

We’re gathering the City of London’s senior executives to hear Mark Carney speech and Q&A with @ChrisGiles_ in a few minutes… #FTMarkCarney

February 12, 2019

The oil price has also risen today, on hopes of a trade breakthrough in Beijing. US crude is up almost 2% at $53.37 per barrel.

Anthony Cheung

US index futures and WTI crude taking some solace in positive noises by officials arriving in Bejing for trade talks. Usually trump deals a tough hand heading into top-level negotiations but hasn’t happened yet, will history repeat itself and we get a WSJ source this afternoon?

February 12, 2019

US delegation land in Beijing for trade talks

An aeroplane carrying top US officials had landed in Beijing, ready for their crunch meeting with China vice-premier Liu He (president Xi’s top economic advisor) later this week.

U.S. Treasury Secretary Steven Mnuchin told reporters that his team are “looking forward to several important days of talks”.

Remembering his manners, Mnuching thanked everyone for turning up at his hotel to greet him, saying it was “great to be here back in Beijing” (following earlier talks in December).

That’s fine, as far as it goes — but it’s not a hint that a trade deal will be reached this week.

U.S. Treasury Secretary Steven Mnuchin arrives at a hotel in Beijing

U.S. Treasury Secretary Steven Mnuchin arrives at a hotel in Beijing Photograph: Jason Lee/Reuters

U.S. trade representative Robert Lighthizer, a member of the U.S. trade delegation to China, arrives at a hotel in BeijingU.S. trade representative Robert Lighthizer (C), a member of the U.S. trade delegation to China, arrives at a hotel in Beijing, China February 12, 2019. REUTERS/Jason Lee

U.S. trade representative Robert Lighthizer arriving at his hotel in Beijing

Photograph: Jason Lee/Reuters

Some US officials have already been holding talks at the China’s Ministry of Commerce yesterday, and today. They’re led by led by deputy U.S. trade representative Jeffrey Gerrish.

Deputy U.S. trade representative Jeffrey D. Gerrish, center, leaving his hotel this morning

Deputy U.S. trade representative Jeffrey D. Gerrish, center, leaving his hotel this morning Photograph: Mark Schiefelbein/AP

Members of a U.S. trade delegation arrive at the China’s Ministry of Commerce.

Members of the US trade delegation arriving at the China’s Ministry of Commerce today for trade talks Photograph: Andy Wong/AP


Wall Street is expected to open higher in three hours time, following those gains in Asia and Europe.

Jesse Cohen

U.S. stock futures pointing to a higher open, with the Dow set for a triple-digit gain amid positive developments on the political front and as investors continued to monitor U.S.-China trade talks $DIA $SPY $QQQ

February 12, 2019


APAC Closing Prices:#ASX 6079.1 +0.30%#NIKKEI 20864.21 +2.61%#HSI 28171.33 +0.10%#HSHARES 11044.65 +0.25%#CSI300 3330.33 +0.72%

February 12, 2019

Here’s how Royal Bank of Canada sums up the scene:

Asia-Pacific equity indices were in the green overnight, led by Japanese stocks which rallied over 2%, amid growing risk-on sentiment after President Trump’s optimistic remarks about China in a rally in Texas saying he would “make great deals on trade” and that he doesn’t want China “to have a hard time”. This speech came soon after an advisor told Fox the president might hold talks in Florida with Xi Jinping next month.

Adding to the positive risk-on sentiment, lawmakers have agreed to a provisional border security deal in order to avoid another government shutdown. The plan includes $1.375 billion for border fencing, however, falling short of Trump’s $5.7 billion, according to Bloomberg reports.

BAML: Trade war is top risk

Although stocks are up today, there’s still plenty of nervousness out there about the long-term prospects for equities.

Bank of America Merrill Lynch’s latest fund manager survey, just released, shows that the US-China trade war is the top ‘tail risk’ worrying investors, followed by a Chinese economic ‘hard landing’.

The survey also shows that money managers moved out of stocks and into cash this month, a sign they’re worried that a correction could be approaching (given the rash of weak economic data and profit warnings).

Holger Zschaepitz

Investors remain bearish despite rally, BofAML Fund Manager Survey shows. Investors rotated into cash this mth, taking net cash allocation to 44%, up 6ppt MoM, biggest overweight since the depths of the Global Financial Crisis in Jan’09. Positioning still a Q1 pos for risk assets

February 12, 2019

The survey also shows that investors believe buying emerging markets stocks is the most crowded trade out there — which could be a problem if everyone heads for the door at the same time.

Katie Martin

Blimey. From BAML’s latest fund manager survey:

“Long EM (18%) is cited as the most crowded trade for the first time in survey history, marking a major reversal from short EM as #3 last month” #sohotrightnow

February 12, 2019

City trader with hands on head looking out over the city.

Maybe it’s something to do with the weather (the sun was spotted over the City this morning), but City experts are in an optimistic mood.

Kit Juckes of Societe Generale says the shutdown breakthrough, and hopes of a US-China trade deal, have raise spirits.

I got to work with markets in a pleasant mood and spring threatening to break out in London. It was all going swimmingly until Word froze….. ah well, nothing lasts for ever….

The US government shutdown seems to have been averted and there’s a strong chance that import tariffs on Chinese goods will be postponed. Risk is on.

Paul Donovan of UBS also sees reasons to be cheerful, saying:

Good news flows from the US. US President Trump has indicated (albeit not with the majesty of a tweet) that great trade deals are just around the corner. An administration official hinted at a meeting between Trump and Chinese President Xi “soon”. As trade taxes are effectively a tax on equities, this has been well received by Asian risk markets.

The US Congress may also be approaching the point where they do not need to shut down the government (again). A possible deal on a border wall has been agreed by negotiators from the two parties. This may reduce fears about the scale of partisan disruption later this year.


Government urged to fix ‘flawed’ RPI inflation measure

The Houses of Parliament on the river Thames in London.

The Houses of Parliament on the river Thames in London. Photograph: Kirsty Wigglesworth/AP

Just in: MPs and Lords are calling for Britain’s “flawed” RPI inflation measure to be fixed.

The House of Commons’ Treasury Committee and the House of Lords’ Economic Affairs Committee are jointly demanding that the government gives the UK Statistics Authority the authority to amend known problems with RPI.

RPI typically gives a higher reading than the consumer prices index (CPI). Thus, it’s unfair that the government uses RPI to raise the price of things we pay for – such as season tickets and student loans – while relying on CPI for benefits such as pensions.

[the problem is that RPI uses a different formula than CPI, and also includes housing costs, so house prices and interest rates moves can make it volatile]

The Stats Authority themselves say that RPI is “a very poor measure of inflation”, and refuse to class it as a national statistic. However, it still calculated it each month.

Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, is damning about RPI’s

“As the Treasury Committee has concluded in numerous reports and statements over the years, RPI is a flawed measure of inflation, and it is absurd for the Government to continue to use it.

“It appears grossly unfair that Government formulae affecting people’s incomes, such as pensions and benefits, often use CPI, whereas formulae affecting outgoings, including student loans, often use RPI, which typically gives a higher rate of inflation.

“The Committee has previously urged the Government to abandon the use of RPI, which has been de-designated as a national statistic. Failing this, the Chancellor should at least consent to UKSA correcting the known errors in the RPI formula.”

Treasury Committee

Chair @NickyMorgan01 said the “Chancellor should at least consent to @UKStatsAuth correcting the known errors in the RPI formula.”

February 12, 2019

RPI was 2.7% in the year to January, while CPI came in at 2.1%. Clearly at least one of them is failing to measure the cost of living properly.

Back in 2017, the FT’s Chris Giles pointed out that RPI shows that women’s vests and strappy tops have quintupled in price since 2010, while CPI only has them becoming 20% pricier. That’s because of an adjustment (now clearly a mistake) made in 2010, which hasn’t been fixed.

Now that might seem just a wacky talking point, until you remember that RPI is also used to calculate how much interest is paid to investors who own UK government debt. They’re at least £15bn better off thanks to RPI, which means taxpayers have LOST £15bn.

Back in the UK, shares in struggling retailer Debenhams have surged 40% (yay!) to the giddy heights of, umm, 4.5p, after it secured a funding lifeline.

The new £40m credit facility should help Debenhams keep operating, as it continues to negotiate with its lenders to restructure its debts.

Sergio Bucher, the chief executive, hailed the new 12-month credit facility as a “first step in our refinancing process”.

It comes after three profit warnings in 2018, and warnings that the company would not survive without a debt deal.

Even after today’s rally, Debenhams is only valued at around £53m – versus debts of over £280m

Weidmann: Eurozone isn’t crisis proof

If the US government crisis is averted, investors will be free to worry about other issues – such as the eurozone.

And one of the front-runners to replace Mario Draghi as head of the European Cenral Bank has just warned that the euro area isn’t fully protected from another crisis. He cited the fact that many eurozone banks are big holders of their own national debt, which amplifies any financial problems.

Bundesbank President Jens Weidmann told an audience in Pretoria that:

“Certain issues like the lack of credibility of fiscal rules or the harmful sovereign-bank nexus still have to be adequately addressed.

Weidmann – a hawkish critic of some of Draghi’s measures to save the euro – also warned that central bankers are being force to take political decisions beyond their remit.

“Acting beyond the mandate would also undermine people*s trust in the central bank….At the end of the day, it could become more and more difficult for the European Central Bank to focus on its promise of a stable currency.”

European stock markets have all jumped in early trading, following gains in Asia overnight.

Germany’s DAX is leading the way, up almost 1%, while in London, the FTSE 100 is up 25 points or 0.35%.

European stock markets

European stock markets Photograph: MeetingRoom/Refinitiv

Earlier, China’s Shanghai index gained 0.7%, Australia’s S&P/ASX picked up 0.3%, while the Nikkei’s 2.6% jump is the standout performance (exporters surged as the yen dipped against the US dollar)

Naeem Aslam of Think Markets says investors will be relieved to hear that another US government shutdown can be avoided.

No one wants to see another government shutdown, especially after a historic one which wasn’t too long ago. These government shutdowns adversely impact the economic health of the country.

Resolving the trade war issues with China would also “really improve the sentiment in the markets”, he adds.

US President Donald Trump at a rally in El Paso, Texas.

US President Donald Trump at a rally in El Paso, Texas. Photograph: Nicholas Kamm/AFP/Getty Images

Donald Trump has put a brave face on his failure to get full funding for his wall with Mexico.

At a rally in El Paso, Texas, Trump declared:

“Just so you know, we’re building the wall anyway”.

(Just not as much as he’d hoped).

That talk will play well with the Trump base; some attendees at the rally were carrying signs urging him to “Build the Wall”.

But – possibly in a precursor to the 2020 presidential campaign – Trump found himself vying for attention with Democrat Beto O’Rourke who held his own rally in Texas.

O’Rourke took a rather different approach to the situation, telling his crowd that:

“With the eyes of the country upon us, all of us together are going to make our stand here in one of the safest cities in America. Safe not because of walls but in spite of walls.”

The agenda: Shutdown deal pushes markets up

Republican Senator from Alabama Richard Shelby, who says a deal to avoid another government shutdown has been reached

Republican Senator from Alabama Richard Shelby, who says a deal to avoid another government shutdown has been reached Photograph: Jim Lo Scalzo/EPA

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

A burst of optimism is rippling through the markets this morning, after US lawmakers reached a tentative deal to avoid another government shutdown.

Overnight, Democrats and Republicans agreed a new spending package, which includes some more money to fund border security. Assuming president Trump signs it off, the deal will keep the Federal government running beyond Friday.

After weeks of deadlock, Republican Senator Richard Shelby emerged to tell reporters that “an agreement in principle” had been reached, and that staff would be “working feverishly to put all the particulars together.”

The deal will provide some money to construct fencing on the US-Mexico border, but this really doesn’t look like a win for Trump.

That’s because Congress is only providing $1.4bn for extra border security, not the $5.7bn the White House had asked for.

As my colleague Tom McCarthy explains:

The agreement would allocate far less money for Trump’s border wall than the White House’s $5.7bn wish list, settling for a figure of nearly $1.4bn, according to congressional aides. The funding measure is through the fiscal year, which ends 30 September.

The agreement means 55 miles of new fencing — constructed through existing designs such as metal slats instead of a concrete wall — but far less than the 215 miles the White House demanded in December. The fencing would be built in the Rio Grande Valley in Texas.

Money has also been set aside for technology such as advanced screening at border entry point, humanitarian aid, and additional customs officers.

News of the breakthrough boosted markets in Asia, where Japan’s Nikkei jumped by 2.61%, or 531.04 points, to end at 20,864.21.

European markets are expected to rise at the open too.


European Opening Calls:#FTSE 7148 +0.26%#DAX 11097 +0.75%#CAC 5043 +0.56%#MIB 19740 +0.78%#IBEX 8980 +0.48%

February 12, 2019

The deal comes as US officials prepare for fresh talks with China over the trade war – another Trump bugbear that has been worrying the markets. Treasury secretary Stephen Mnuchin and trade representative Robert Lighthizer are due to meet Chinese Vice Premier Liu He in Beijing on Thursday.

Yesterday, White House adviser Kellyanne Conway revealed that president Trump is still keen to meet China’s Xi Jinping “very soon” to hammer out a deal, saying:

“This president wants a deal. He wants it to be fair to Americans and American workers and American interests.”

Given the slowing global economy, investors would welcome a breakthrough – before even more tariffs are imposed on US and Chinese goods.

Bloomberg Economics

Trump wants to meet with Xi “very soon” in an effort to end the trade war, Kellyanne Conway says: “This president wants a deal”

February 12, 2019

Also coming up today

Bank of England governor Mark Carney is speaking about the global economy, and risks to the outlook, at an event in London, organised by the Financial Times. Trade wars will probably come up.

Chris Giles

Looking forward to chairing @ftlive event tomorrow with BoE governor Mark Carney speech and Q&A #FTMarkCarney

February 11, 2019

Otherwise it’s a quiet day.

The agenda

  • 1pm GMT: Bank of England governor Mark Carney discusses the global economy



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