US-China trade war – live: Stock markets tumble after Trump labels China ‘currency manipulator’
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An escalating trade war between the US and China looks increasingly likely to blow up into a full-blown currency war after the Trump administration accused Beijing of manipulating the renminbi.
European markets were up slightly following losses across Asian exchanges on Tuesday, following sharp drops on Wall Street the previous day. The falls came as a trade dispute ratcheted up significantly with the US Treasury saying China had allowed its currency to devalue to create an unfair trade advantage.
Meanwhile, the pound rose above recent lows against the dollar but remained vulnerable as concerns heighten that Boris Johnson is leading the UK towards a chaotic no-deal Brexit and the significant economic damage that it would bring.
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Good morning and welcome to The Independent's live coverage of business and economics events around the world. Stock markets across Asia have fallen after tensions rose between the US and China.
In the UK, former US Treasury secretary Larry Summers labelled government ministers "delusional" for believing they could get a favourable trade deal with America after Brexit and retail sales slumped to their weakest ever level.
Among the largest fallers on Monday were major computer game stocks which were hurt by Donald Trump's attempt to pin some of the blame for this week's mass shooting on "the glorification of violence" (rather than relaxed gun control measures).
“We must stop the glorification of violence in our society. This includes the gruesome and grisly video games that are now commonplace,” Trump said.
Electronic Arts was down 4 per cent while Zybga, the maker of Farmville and other social games, fell 5 per cent.
One of the UK's leading manufacturers, Rolls-Royce, has reported narrowing losses, despite ongoing problems with its Trent 100 engines.
Pre-tax losses dropped to £791m in the first half of the year compared to £1.2bn in the same period last year. Revenues climbed 5.3 per cent to £7.9bn.
Julie Palmer, partner at Begbies Traynor, says:
“British manufacturing has suffered a tumultuous year and Rolls-Royce has felt the full force of Brexit uncertainty, stockpiling for a no deal, international trade wars and pressure to reduce emissions making it a challenging time for aerospace engineering. “CEO, Warren East will be hoping his turnaround plans start to take effect soon and alleviate the pressure, after having made a series of cuts to jobs. “However, these results will have brought a cheer to the step of those associated with Rolls Royce. Yes, it is only closing the losses, but in this climate it shows promise for the future. The latest government contract win, an uplift from its defence and power-systems arms and the recent purchase of an electric aerospace business and employees will have added hope for the future. If Rolls-Royce can get the technology to take-off, shareholders will be looking to greener pastures on the horizon.”
What could act as a safe haven in these times of economic tumult?
Not gold, but bitcoin. That's the view of one analyst in the face of at least one market watcher, anyway.
Nigel Green, founder of financial advisory firm deVere Group, sees the cryptocurrency rising to $15,000 from its current level of $12,230.
“The world’s largest cryptocurrency, Bitcoin, jumped 10 per cent as global stocks were rocked by the devaluation of China’s yuan as the trade war with the US intensifies.
“This is not a coincidence. It reveals that consensus is growing that Bitcoin is becoming a flight-to-safety asset during times of market uncertainty.
“Bitcoin is currently realising its reputation as a form of digital gold. Up to now, gold has been known as the ultimate safe-haven asset, but bitcoin - which shares its key characteristics of being a store of value and scarcity – could potentially dethrone gold in the future as the world becomes increasingly digitalised.”
Whether this can be sustained or not is anyone's guess...
Analysts are speculating that the next step in the increasingly bitter dispute between Beijing and Washington could be an intervention by the US president into the currency markets to weaken the dollar.
Trump believes China has deliberately weakened the renminbi to make its exports cheaper; of course the other side of that coin, from a US perspective, is the strength of the dollar making American exports pricier.
“President Trump has been very vocal in lamenting US dollar strength and its threat to his economic agenda," says George Efstathopoulos, portfolio manager at Fidelity International.
"He’s failed to rule out currency intervention when asked directly and has a good track record of following through with his warnings. The chance of getting his way is surely higher now the Treasury have labelled China a currency manipulator and because the same department also has responsibility for setting US dollar policy.
“This latest move at least levels the playing field somewhat and opens the door to a currency war, which would certainly up the ante in the trade war. However, it could prove counterproductive considering that in recent times, China has intervened to stop their currency from depreciating further rather than manipulating their currency weaker as accused by the US."
Former US treasury secretary Larry Summers has rubbished Boris Johnson and Dominic Raab's "delusional" post-Brexit fantasy of securing a favourable trade deal with America.
One of Barack Obama's key economic advisors in aftermath of the financial crisis delivered a frankly brutal assessment of Britain's no-deal Brexit strategy and approach to trade relationships.
Here's our political editor Andrew Woodcock with the full story:
After a tough few days, some respite for the FTSE 100 which is up a less-than-colossal 7 points this morning to 7,230.94.
That will come as a relief after six straight sessions of falls, including Monday which saw the blue-chip index's worst day of 2019 so far.
Germany's DAX is up 0.7 per cent and over in Paris the CAC 40 is up 0.9 per cent on the day.
Beyond markets and the US-China trade tensions, there's been some upheaval in the world of pizza delivery.
Domino's chief executive and chairman have quit after a pretty poor year.
Why? Partly it's down to Domino's franchisees who want a bigger cut for actually owning and managing the company's restaurants.
Domino's said this week it expected the dispute to stretch into next year. It's also been feeling the heat from rising competition from the likes of Deliveroo, Uber Eats et al.
Still, sales rose 4.7 per cent in the first half of the year to £645.8m, but pre-tax profits slid 27 per cent to £30.5m.
China is the only country that the Trump administration has branded as a "currency manipulator" but it could be joined by a few others who have been put on the US Treasury's monitoring list.
Also on Trump's naughty step: Germany, Ireland, Italy, Korea, Malaysia, Singapore and Vietnam. Or, in visual form:
China's state media has hit back at the US, accusing Washington of "deliberately destroying international order”.
The official Communist Party newspaper, the People's Daily, said the US had "seriously undermined international rules".
China's central bank has also weighed into the dispute, saying that America's decision to brand Beijing as a currency manipulator could “severely damage international financial order and cause chaos in financial markets”.
China “has not used and will not use the exchange rate as a tool to deal with trade disputes,” the People's Bank of China said in a statement on its website.
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