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Chinese state media accuse US of 'destroying international order' – business live

Beijing hits back after being branded a currency manipulator by Washington; yuan steadies

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A woman walks past the headquarters of the People’s Bank of China (PBOC), the central bank, in Beijing, China.
A woman walks past the headquarters of the People’s Bank of China (PBOC), the central bank, in Beijing, China. Photograph: Jason Lee/Reuters

UBS, the Swiss investment bank, has sent us its analysis of the impact of the 10% tariff on $300bn of US imports from China threatened by Donald Trump last Friday.

The direct impact of the new tariffs, if implemented, would reduce US GDP by 0.15%, and we estimate Chinese GDP growth in the next 12 months could fall by 0.25–0.5 percentage points as a result, which would push the country’s growth rate below 6% into 2020.

Mark Haefele, chief investment officer at UBS Global Wealth Management, says:

China’s response to recent trade escalations has been relatively measured and we expect a similar reaction this time, with retaliation involving a mix of more tariffs and non-tariff measures. Potential non-tariff measures include a managed depreciation of the yuan to mitigate the trade impact from higher tariffs, penalising select US companies operating in China, and imposing export restrictions on rare earth metals.

He warned investors not to overreact.

There is still time to find a compromise, trade talks between the US and China scheduled for September have not been called off, and investors should also consider potential offsetting factors such as rate cuts by central banks and stimulus in China. Our base case assumes a long, drawn-out negotiation process, during which tensions can occasionally flare up.

An environment of a) rising trade tensions and b) potential stimulus, including falling interest rates, is tricky for investors to navigate. While we ultimately believe that US–China tradetensions will be resolved through negotiations, we think equities may struggle to move markedly higher until there is greater certainty.

Goldman Sachs sees no trade deal before 2020 US election

Goldman Sachs no longer expects the United States and China to strike a trade deal to end their prolonged dispute before the November 2020 presidential election.

The US investment bank also now expects two more back-to-back interest rate cuts from the US Federal Reserve, in September and October, “in light of growing trade policy risks, market expectations for much deeper rate cuts, and an increase in global risk related to the possibility of a no-deal Brexit”. The Fed cut rates last week for the first time in more than a decade.

Goldman Sachs chief economist Jan Hatzius says:

The Fed has been increasingly responsive this year to trade war threats, bond market expectations, and global growth concerns.

In a tweet yesterday, Donald Trump urged the Fed to take note of the yuan’s sharp drop against the dollar – piling pressure on it to cut rates again.

A Goldman Sachs sign is displayed inside the company’s post on the floor of the NYSE in New York.
A Goldman Sachs sign is displayed inside the company’s post on the floor of the NYSE in New York. Photograph: Brendan McDermid/Reuters

Here is our full story on the Boohoo move for Karen Millen and Coast, which is putting 1,100 jobs at risk, by Guardian reporter Jasper Jolly.

Eliot Kerr, economist at IHS Markit, which compiles the survey, said:

Growth remained subdued in the eurozone construction sector during July, as activity declines in Germany and Italy acted to drag on an expansion in France. New construction orders across the currency area were broadly stagnant for the second month in succession, dampened by a sharp reduction in Germany.

At the sub-sector level, the only substantially positive contribution came from commercial project activity. That said, the latest increase for the category was only marginal overall and the slowest for four months.

Construction site of Lidl food discounter in Bad Wimpfen, Germany.
Construction site of Lidl food discounter in Bad Wimpfen, Germany. Photograph: Ronald Wittek/EPA

New orders in the eurozone’s construction sector remained unchanged for the second month in a row, but firms reported solid increases in employment and purchasing activity.

Updated

Eurozone construction firms slightly

Construction in the eurozone expanded at a slightly faster rate last month, according to the latest IHS Markit purchasing managers’ index. Its headline reading rose to 50.8 in July from 50.6 in June. It recorded modest expansion in France and small declines in Germany and Italy.

Job fears: Boohoo bids for online businesses of Karen Millen, Coast

The online fashion retailer Boohoo has made an offer to buy the online businesses and brands of Karen Millen and Coast, in a move that will raise fears for the jobs of hundreds of employees in the brands’ high street stores.

Karen Millen and Coast together employ about 1,100 people with 32 stores and 177 concessions in the UK.

This could be yet more bad news for retail workers, after Tesco slashed 4,500 jobs at 153 Tesco Metro supermarkets in the UK yesterday, while the banking giant HSBC announced up to 4,700 job cuts around the world.

Karen Millen, Regent Street, London.
Karen Millen, Regent Street, London. Photograph: Sarah Lee/The Guardian

European shares higher, FTSE down 0.5%

European stock markets have stabilised after the rout in recent days, and are trading slightly higher this morning. The Dax in Frankfurt has gained 0.35% while the CAC 40 in Paris is 0.19% ahead.

In London, the FTSE 100 is down 0.49%, however, falling to 7,190.

Sterling has firmed slightly against the dollar and the euro, by 0.27%, to $1.2175 and €1.0871 respectively.

Updated

British retailers have recorded the worst month for sales in July since records began, as consumers tighten their belts with Brexit approaching, the industry body has reported.

According to British Retail Consortium sales data compiled by the accountancy firm KPMG, total sales increased by 0.3% in July, compared with a rise of 1.6% in July last year, writes our economics correspondent Richard Partington.

With the British economy facing growing uncertainty, the industry lobby group said the rise was the weakest since its records began in 1995.

Helen Dickinson, the chief executive of the BRC, said low real-wage growth for UK households and Brexit had left consumer spending languishing. The average growth in sales over the past 12 months was 0.5%, the weakest expansion on record.

Whereas last year’s glorious sunshine and World Cup finals led to strong consumer demand over the summer, this year has been weak in comparison.

The famous Liberty store in London.
The famous Liberty store in London. Photograph: Bailey-Cooper Photography/Alamy Stock Photo

And we are off – European stock markets are mixed in early trading.

  • UK’s FTSE 100 down 21 points, or 0.29%, at 7,202
  • Germany’s Dax up 0.3%
  • France’s CAC down 0.1%
  • Spain’s Ibex up 0.1%
  • Italy’s FTSE MiB up 0.16%

Introduction: Beijing hits back at Washington

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

Chinese state media have said that the United States was “deliberately destroying international order,” a day after Washington branded Beijing a currency manipulator in an escalating trade war. Donald Trump tweeted the accusation after a sharp drop in the yuan beyond the seven-to-one-dollar rate for the first time since 2008.

The US Treasury secretary, Steven Mnuchin, then also accused China of manipulating its currency “to gain unfair competitive advantage in international trade”. The US will now ask the International Monetary Fund to “eliminate the unfair competitive advantage created by China’s latest actions”.

zerohedge (@zerohedge)

US Treasury just designated China as a currency manipulator. pic.twitter.com/kClbuOBRVw

August 5, 2019

China’s official Communist Party newspaper, the People’s Daily, said in an editorial that the US was holding its own citizens to ransom, Reuters reported.

The responsibility of big countries is to provide the world with stability and certainty while creating conditions and opportunities for the common development of all countries, according to the editorial.

“But some people in the United States do just the opposite,” it said.

After losing more than 2% in recent days, since Trump threatened fresh 10% tariffs on $300bn of Chinese imports from 1 September on Friday, the yuan has steadied. Today, the People’s Bank of China set set the yuan fixing at 6.9683, stronger than expected.

However, Asian stock markets are a sea of red again as traders worry about the impact of the trade tensions on the global economy. The escalation has caused a major sell-off on world markets in recent days. On Wall Street, the Dow Jones and the S&P 500 indices both closed nearly 3% lower yesterday while in the London, the FTSE 100 index tumbled 2.47%.

  • Japan’s Nikkei down 0.65% at 20,585
  • Hong Kong’s Hang Seng down 1.14% at 25,853
  • China’s CSI 300 down 1.22% at 3,630
  • South Korea’s Kospi down 1.17% at 25,845
  • Singapore’s Straits Times down 0.81% at 3,168

European shares are also expected to open lower.

The economic calendar looks pretty bare today. We’ve had German factory orders for June this morning, which were surprisingly strong. They rose 2.5% from the previous month, bringing some respite after Germany’s recent manufacturing slump. However, the figures tend to be volatile.

Zoe Schneeweiss (@ZSchneeweiss)

German factory orders rebound on foreign investment-goods demand https://t.co/Me1FrHX2Pl via @pladson_k #tictocnews pic.twitter.com/pRv4jiqQkf

August 6, 2019

The Australian central bank held interest rates at an all-time low of 1% and its governor Philip Lowe said it was “reasonable to expect that an extended period of low interest rates will be required in Australia”, to boost employment growth and inflation. He will appear before a parliamentary committee on Friday and is likely to be asked about the impact of the US-China trade war.

The Agenda

8:30am BST: Markit Eurozone Construction PMI (July)

Updated

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