UK retail sales fall as customers cut back on food
Newsflash: UK retail sales shrank by 0.8% in September, a bigger fall than expected.
The Office for National Statistics reports that customers bought less food after a strong August.
The ONS says:
In September 2018, the quantity bought declined by 0.8% when compared with August 2018, due mainly to a large fall of 1.5% in food stores; the largest decline in food store sales since October 2015.
Economists had only expected retail sales to dip by 0.4% month-on-month.
On an annual basis, retail sales in September were 3% higher than a year earlier (or 3.2% higher if you strip out petrol sales).
More to follow…
China down 25% this year
It was another rough trading session in China today.
Nearly every stock fell, as today’s 3% slump means the Shanghai index has lost almost 25% of its value this year alone.
Bloomberg says that some speculative traders are being forced to put up more more money to cover their losses. This leads to more selling, and thus more losses, in a destructive cycle also seen in the 1929 crash.
Chinese shares extended the world’s deepest slump and the yuan touched its weakest level in almost two years, testing the government’s ability to maintain market calm as risks mount for Asia’s largest economy.
Fears of widespread margin calls fuelled a 3 percent tumble in the Shanghai Composite Index, which sank to a nearly four-year low as more than 13 stocks fell for each that rose
Shares in Europe have opened a little higher, despite the WTO’s trade war gloom.
The FTSE 100 has gained 19 points, or 0.3%, 7,073. France’s CAC and the German DAX are both up around 0.45%.
Multinational European companies are benefiting from the stronger dollar (a weaker euro makes their US earnings more valuable).
The Chinese yuan is also weakening this morning, hitting its lowest level since January 2017
Yesterday, the US Treasury resisted labelling China a ‘currency manipulator’, in a new report on the foreign exchange policies of major US trading partners.
President Donald Trump has previously accused China of keeping its currency weak to make exports more competitive, but the Treasury has now shied away from taking action.
Trump’s complaints were ironic, though, that Beijing has actually been intervening to prevent the yuan falling too much.
Today, the yuan has dipped to 6.9422.
Many other currencies are also dropping against the US dollar this morning, after last night’s hawkish Fed minutes. A weaker currency could help Chinese firms swallow tariffs on their sales to the US…..
China’s stock market hits fresh four-year lows
Roberto Azevedo’s warning of the perils of a trade war will have resonated in China’s stock exchanges today.
Shares are sliding sharply AGAIN today, as traders fear that the dispute with America will escalate further.
The Shanghai composite index has just closed, down 3%, at its lowest level since November 2014.
How bad would a full-blown breakdown of trade relations be?
According to WTO chief Roberto Azevedo, “a complete breakdown in international trade cooperation” would drive tariffs higher, knocking up to 17% off global trade growth.
That worst-case scenario could knock 1.9% off overall global economic growth, WTO economists reckon.
The agenda: WTO warns of trade war risks
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Trade wars are on investors’ minds this morning, after the World Trade Organisation fired a broadside at the US and China over their deepening dispute.
Roberto Azevedo, WTO director-general, told an audience in London that we are facing a crisis in global trade.
Calling for a cease-fire in the current trade ware, Azevedo warned that:
“Without action to ease tensions and recommit to cooperation in trade, we could see serious harm done to the multilateral trading system.
The long term economic consequences of this could be severe.”
Currently, the US imposes tariffs on $250bn of Chinese imports, as it tries to force Beijing to change its trade policies. Instead, China has retaliated with its own tariffs.
Azevedo says a political solution is needed, before “serious harm” is incurred by the multilateral trading system. Potentially, it could force millions of people to seek new jobs, he explained:
“These effects would cause significant disruptions for workers, firms, and communities as they adjust to this new reality.
“Potentially millions of workers would need to find new jobs; firms would be looking for new products and markets; and communities for new sources of growth.
Also coming up
New UK retail sales data are expected to show Brits cut back last month. Retail spending is expected to have fallen by 0.4% last month.
Jasper Lawler of London Capital Group says:
Once again groceries are expected to continue to do well, whilst non-essential items continue to disappoint.
After a strong summer of spending from the UK consumer, and a surprise to the upside in August, there is a good chance the UK consumer is reining in their spending ahead of the Christmas period.
The City is bracing for further US interest rate rises in future months, after the Federal Reserve signalled it intends to keep hiking – despite Donald Trump’s criticism.
- 9.30am BST: UK retail sales figures for September
- 1.30pm BST: US weekly initial jobless data