Week in review: trading blows

Most global markets fell heavily at the start of the week. The slump came after President Trump unleashed a tirade on Twitter, escalating trade tensions between the US and China.

Trump upped the ante in his anti-Chinese rhetoric and then imposed further tariffs. Levies on $200 billion-worth of Chinese imports increased from 10% to 25%. The president also claimed that the US would target the remaining $325 billion of Chinese imports that are currently untaxed. The tariff threats came in the run-up to a Chinese delegation’s arrival in Washington for a fresh round of trade talks. Meanwhile, the US redeployed warships to the Middle East as US/Iranian relations deteriorated. The White House is also sending a military hospital ship to Venezuela to assist refugees.

Although Trump’s economic and military sabre-rattling may have largely been conducted with an eye on the 2020 election, it prompted a risk-off reaction among investors, with a notable spike in the VIX ‘fear index’. The S&P had fallen 2.5% by Thursday’s close. In the UK, the FTSE 100 was down 2.4%. The FTSE World Europe ex UK index lost 3.7%. Japan’s Topix was down 4.2%, and the Shanghai 180 registered a hefty 8.1% decline.

Budget blues

Besides the Trump Twitter jitters, investors were disconcerted by some bleak economic news from Europe. The European Commission (EC) announced forecasts for Italy’s 2020 budget deficit that significantly surpassed the assumptions of the Italian government. At 3.5%, the projected deficit would breach the Maastricht limit of 3% of GDP. This would be Italy’s first such breach since 2014 (or 2011, depending on which decimal point you stop at). A clash with the EC looks likely when new commissioners are appointed later this year.

It is worth noting, however, that there are worse offenders in the Eurozone – most notably France. While Italy and its fellow PIIGS (Portugal, Ireland, Greece and Spain) were forced to take remedial action during the Eurozone debt crisis, France has run cumulative deficits approaching those of Portugal since 2008. Indeed, France has breached the Maastricht deficit criterion on 14 occasions since Greece adopted the euro in 2001 – just one year less than Greece and Spain and four years more than Italy. Some members of the Eurozone appear to be more equal than others …

Meanwhile, the EC cut Germany’s 2019 GDP forecast again, from 1.1% to 0.5%. In the Eurozone, this puts Germany ahead of only Italy, which is forecast to narrowly escape contraction with growth of just 0.1%. The growth prediction for the Eurozone as a whole is 1.2% this year.


Amid all the macroeconomic gloom, there was some brighter news on the corporate front. As the first-quarter reporting season drew to a close, AIG, Allergan, Munich Re, Occidental and Siemens all beat expectations in their earnings. Commerzbank’s results were in line with forecasts.

It wasn’t all plain sailing, though. Vestas, the world’s biggest manufacturer of wind turbines, disappointed with its lowest quarterly profit for five years. Its CEO resigned. And in South Africa, global furniture retailer Steinhoff belatedly reported a $4 billion loss for 2017.

Vote of confidence?

There were some positive corporate developments to cheer Brexit-battered investors in the UK. Despite all the ongoing uncertainties, Facebook announced that it had chosen London for its WhatsApp mobile payment hub. And Sweden’s Polestar, an electric-vehicle joint venture between Volvo and Geely, has elected to set up a research & development centre in the UK. Polestar cited British engineering expertise as the reason for its decision.

In Westminster, Theresa May proposed putting her withdrawal bill before Parliament ahead of the European elections later this month. This fourth indicative vote would come if talks to agree a deal with the Labour Party break down.

And finally …

We all make mistakes. Luckily for most of us, our errors don’t tend to be replicated millions of times and circulated around an entire country (if we stay off Twitter, that is …).

So spare a thought for an unnamed employee at the Reserve Bank of Australia who managed to plant a typo on the brand-new A$50 note – not once, but three times. The repeated error – responsibilty for responsibility – comes in a quotation from Edith Cowan, the first woman to serve as a member of the Australian parliament. Her maiden speech is used as background text on the note.

Fortunately, the text is so small that no one noticed for six months after the note’s release. It’s a reminder, though, to always read the small print – and it’s made our own proof-readers more than a little jumpy today!


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