- Pan-European share index hits four-year high
- Goldman Sachs: Trade war drag on global economy to fade in 2020
The latest fall in output volumes was mainly driven by motor vehicles and metal products, while mechanical engineering, plastic products and aerospace have fared better and made positive contributions to output. Looking ahead, firms overall anticipate production to be flat in the next three months.
The CBI said growth across the UK economy has been volatile this year as businesses were forced to shift activity in response to moving Brexit deadlines (the first deadline of 29 March was extended to 31 October, which in turn has been extended until 31 January).
We expect the economy to grow modestly in the event of a smooth transition to a new Brexit deal, with the longer-term economic impact dependent upon the details within the final deal.
The survey of 307 manufacturers also found that export orders continued to fall, with the monthly balance at -22%, an improvement from the -41% registered in October.
A gauge of factory output over the past three months was -9%, similar to October’s -10%.
While the thick fog of uncertainty from a No Deal Brexit has lifted somewhat, the manufacturing sector remains under pressure from weak global trade and a subdued domestic economy.
Order books remain below average, and output volumes continue to fall. When taking into account the deteriorating outlook for manufacturing globally, it’s clear that the outlook for the sector remains precarious.
The CBI industrial trends survey is out. It suggests British manufacturers enjoyed a pick-up in orders in November, after hitting a nine-year low the month before, as the risk of a no-deal Brexit receded.
The survey showed 13% of manufacturers reported total order books to be above normal while 40% said they were below normal this month, resulting in a net balance of -26%, up from -37% in October. It remains below the long-run average of -13%.
Goldman Sachs is predicting that the drag on the global economy from the trade war between the US and China – the world’s two biggest economies – will gradually fade next year.
Jan Hatzius and other economists at the US investment bank wrote in a note yesterday that the progress towards a partial trade deal and expectations of an extended truce should benefit the world economy – assuming there is no further escalation of tariffs. The US is due to impose more tariffs on Chinese goods on 15 December, if an agreement is not struck by then.
Traders are buying back into the market despite a lack of progress in the US-China trade talks – but people are clearly hoping for a deal sometime soon.
Comments from China’s central bank governor Yi Gang are also providing a fillip to stock markets. He has just promised to step up credit support to the economy and push real lending rates lower. This comes after the People’s Bank of China cut its short-term funding rate for the first time since 2015 yesterday to prop up the economy.
Chris Beauchamp, chief market analyst at online trading platform IG, has sent us his thoughts on the “bull market” and tonight’s TV clash.
European markets are rallying and US futures are already pointing to solid gains, as risk appetite comes storming back following a mixed session yesterday. It is almost as if this is still a bull market.
Disturbances in Hong Kong have failed to dent the bullish view, and with trade wars still mercifully quiet the indices appear to have taken the bit between their teeth – European indices are surging in impressive fashion, and even the FTSE 100 is powering higher.
The pound, meanwhile, is not doing very much after yesterday’s gains, boosted by the Conservative party’s lead in the polls. Against the dollar, sterling has slipped 0.02% to $1.2952 this morning. Tonight we will get the first TV debate between Boris Johnson and Jeremy Corbyn (8pm GMT on ITV).
The rally on stock markets is gathering pace. The FTSE 100 in London is now 1.08% higher, at 7,386.73, a gain of almost 80 points.
The Dax in Frankfurt has gained 1.23% to 13,368.34. The CAC 40 in Paris is up 0.55% and the FTSE MiB in Milan is 0.78% ahead.
Pierre Veyret, technical analyst at trading platform ActivTrades has looked at the rally in European shares.
European markets are trading significantly higher, led by miners and the travel and leisure sector, despite a mixed trading session in Asia. Global sentiment remains bullish on stocks as investors look for further positive signs from the trade talks. Investors have already priced a trade deal in with many benchmarks around the world now hitting record prices and P/E ratio levels.
This could be a dangerous situation for bull traders if negotiations between Beijing and Washington slow down as many traders have already bought the rumour. Today, investors’ focus will be drawn to both US building permits data as well as the first televised leadership debate in the UK, prior to December’s general election.
Russ Mould, investment director at the UK stockbroker AJ Bell, says the move shows the aviation sector is under real pressure to address its environmental impact.
Regular fliers often fret about their carbon footprint so EasyJet’s move, at a significant but not unmanageable cost of £25m a year, could pay off. Well, at least if it is seen as a genuine strategy and not just window dressing.
The news comes hot on the heels of Wizz Air CEO Jozsef Varadi’s call for a ban on business class – the Hungarian-based outfit styles itself as Europe’s greenest airline.
Easyjet says it will become “world’s first major airline to operate net-zero carbon flights”. From today the airline will offset all of the CO2 emissions from its 329 aircraft by investing £25m pa in renewable projects. 85% of Easyjet’s carbon footprint is from burning jet fuel.
EasyJet claims 7M tons of CO2 can be offset with £25M. That’s £3.50 per ton.
Only direct air capture and geological storage can guarantee to lock up CO2 for the minimum 200 years required. This would cost £350 per ton.
Greenwash ratio: 100:1
Back to easyJet’s pledge to become “the world’s first major net zero carbon airline”.
Amazingly, it will only cost £25m to offset carbon emissions from the fuel used for all flights in the year to 30 September 2020. So why are not more airlines doing this?
Carbon offsetting is an interim measure and we will continue the push to reinvent aviation for the long-term, including development of sustainable fuel and electric flying.
Global shares are pushing higher again as traders bet on a trade deal between the US and China. The clock is ticking, though – a preliminary deal needs to be agreed before 15 December, when Washington is due to impose a new round of tariffs on Chinese goods.
The MSCI world equity index, which tracks shares in 47 countries, edged up 0.1% to its highest level since January last year.
EasyJet shares have also gained 4%, to £13.26, despite a 26% drop in pretax profits to £427m for the year to 30 September.
The budget airline carried record passenger numbers but blamed weaker confidence due to Brexit uncertainty for a 1.8% fall in revenue per seat.
I am really thrilled that with the launch before Christmas of our brand new EasyJet Holidays business, we are bringing flexibility and excellent value to the holiday market. We believe there is a gap in the market for a modern, relevant and flexible business for today’s consumer.
Cobham shares rose more than 4% on the news, and are now trading 3.9% higher at 160.8p.
The FTSE 100 index has pushed almost 40 points higher to 7,346.31, a gain of 0.53%. European stock markets are also rising.
There is news on the planned £4bn takeover of the UK defence firm Cobham by the US private equity group Advent. The UK government now suggests that it is minded to allow the deal, after Advent made several legally binding undertakings such as placing a number of British executives on the defence company’s different boards.
Andrea Leadsom, the business minister, put the deal on hold in mid-September and ordered an investigation into whether the sale poses a national security threat. Cobham, based in Dorset, is a world leader producing systems for planes to refuel in mid-air.
European stock markets are up –
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The waiting game continues for the US-China trade deal. Chinese state media described the latest discussions, held by phone over the weekend, as “constructive,” but a report from CNBC suggested yesterday that the mood in Beijing was pessimistic. Doubts have crept in over whether a preliminary deal can be struck, and when.
There are some lingering doubts over whether a phase one deal can be struck. The suspicion is that there’s a lot more wrinkles to iron out than initially thought.
In the middle of next month, the Trump administration will introduce fresh tariffs on roughly $156bn worth of Chinese imports, unless something changes. Some traders are hoping phase one of the overall trade deal will be agreed upon by then so there will be no need to press ahead with new tariffs.
Mr Trump would like more concessions from China in relation to intellectual property rights, but for now he doesn’t want to reverse tariffs, but China are open to the idea of rolling back on the levies. The toing and froing of the trade spat will probably continue up until when the next round of US levies are set to kick in, and then we could see some constructive talks.