Trade war anxiety builds; UK inflation sticks at 1.7% – business live – The Guardian, Theguardian.com

UK house price inflation has picked up … but not in and around the capital.

Average house prices in the UK increased by 1.3% in the year to August 2019, the ONS reports , up from the seven-year low of 0.8% in July 2019.

That’s still relatively weak by recent standards. As this chart shows, there has been a general slowdown in UK house price growth since 2016 (and a certain referendum ..

The average UK house price was £ 235, 000 in August 2019, £ 3, 000 higher than August 2018

London has led the slowdown – with prices dropping for several months. Prices fell by 1.4% over the year to August 2019, followed by the South East where prices fell by 0.6% over the year.

But there’s solid growth in the North East (3.3%) and the North West (3.1%).

There’s still a substantial North-South divide, though, with the average London property costing £ 473, 000.

TUC General SecretaryFrances O’Gradyis concerned by this week’s economic data:

“Low inflation alongside falling employment is a worrying sign the economy is weakening.

“The government needs an urgent plan to protect growth by speeding up higher public sector investment.

“And MPs must stop the prime minister from forcing through the hardest possible Brexit, which would harm jobs, rights and livelihoods.”

A handy reminder of which inflation rates matter:

UK inflation has now stuck at its lowest level since December 2016 for two months in a row.

It rose sharply in the months following the EU referendum, as the slump in the pound hit import costs. That impact has now faded, slowing the rise in the cost of living

The ONS has also found that raw material prices are down year-on-year, by 2.8%.

This is pulling down ‘factory gate inflation’ too. It hit a three-year low last month, meaning manufacturers aren’t raising their prices as fast.

At 1.7%, Britain’s headline inflation rate is below the Bank of England’s target of 2% – meaning less pressure to consider raising interest rates.

But in the current political climate, the BoE is leaning towards cutting borrowing costs – especially if there is another Brexit delay.

Sam Cooper, vice president of Market Risk Solutions at Silicon Valley Bank, explains:

“While the below target reading will provide a welcome distraction for participants searching for some Brexit respite, direction will continue to be driven by political developments.

After unemployment data disappointed yesterday, today’s inflation miss could bolster the case for a dovish mantra from the BoE as they navigate uncertain waters. Participants with sterling exposure will likely spend the days chained to their desk as headlines continue to fuel volatility. ”

September’s subdued inflationis good news for workers – it means real wages are still growing.

Yesterday we learned that average earnings, including bonuses, rose by 3.8% per year in the 12 months to August. That’s down from 4.0% the previous month, though, suggesting the labor market is cooling. Unemployment rose, lifting the jobless rate from 3.8% to 3.9%.

Snap reaction

Newsflash: UK inflation remained subdued in September.

The Consumer Prices Index rose by 1.7% year-on-year, matching August, and below the 1.8% expected.

The Office for National Statistics says;

• The largest downward contributions to change in the CPIH 12 – month inflation rate, between August and September 2019, came from motor fuels, second-hand cars, and electricity, gas and other fuels.
• These downward movements were offset by upward movements from furniture, household appliances, hotel overnight stays, and from recreation and culture items.

(More to follow ….

The US-driven trade conflict is giving the global economy depression.

So warns Kit Juckes of Société Générale, who says America’s move away from free trade is the more important geopolitical issue driving markets (followed by Brexit).

He cites yesterday’s gloomy economic forecasts from the IMF, which now expects the weakest growth in a decade, adding:

It’s worth pointing out, as an aside, that the IMF isn’t in the business of scaremongering: As late as July 2008 they weren’t forecasting a 2009 recession in any of the world’s biggest economies. Indeed, today’s forecast of 3% global growth this year, and 3.4% next year, compares to a forecast in July 2008 of 4.1% that year and 3.9% in 2009.

Speaking of Brexit …. Whitehall’s spending watchdog has warned of chaos at the ports if the UK leaves the EU without a deal.

The National Audit Office says, in a timely warning, that there could be freight delays, more crime and fewer checks on migrants entering the country.

Losing control, rather than taking it back …..

Sterling has taken a bit of a bath this morning, as traders fret that a last-minute Brexit deal isn ‘ t going to happen.

The pound has dropped by almost a cent, back below $ 1. 27, having hit a five- month high of $ 1. 2798 on Tuesday

Boris Johnson is struggling to persuade the Northern Ireland unionist DUP party to support his proposal of a customs border in the Irish Sea.

EU and UK officials are still talking, but one British insider says there is “more work still to do”. But not much time, with an European Council summit starting tomorrow.

Online fashion company ASOS is bucking the trend this morning, with its shares surging 16% in early trading after reporting financial results.

That’s quite a jump, especially as ASOS had a shocking year. Pre-tax profits slumped 68% in the 12 months to 31 August, following serious problems at warehouses in Germany and the US that messed up trading.

The company admits it overreached itself, by trying to pull off major expansion in the US and Europe at the same time.

With a dollop of mea culpa, it tells shareholders:

Accordingly we lost focus on several of our core competencies, notably product, presentation and customer engagement.

But sales are still up 13%, despite these hitches, and CEO Nick Beighton claims to be in a “more positive position” for this financial year.

European stock markets have made a lackluster start to trading too, with the Stoxx 600 index down 0. 25%.

There’s another problem with the US-China trade ‘deal’ announced on Friday.

Beijing has, apparently, pledged to buy $ 50 bn of US farm products – a major increase on the $ 20 BN traded in 2017. So to achieve it, China would have to drop tariffs on US agricultural goods.

Sources have told Bloombergthat Beijing wants the US to roll back some of its own tariffs in return, and won’t act otherwise ….

China’s stock market has lost some ground overnight.

The Shanghai Composite Index is down 0.4% in late trading, amid worries that the “phase one” trade deal could be unraveling.

Other Asia-Pacific markets are up, though, taking their cue from Wall Street (where the S&P 500 earned 1% on Tuesday).

The row between Beijing and Washington over Hong Kongis threatening to derail the trade war talks, saysIpek Ozkardeskaya, senior market analyst atLondon Capital Group:

US stock futures headed south in the overnight trading session, as tensions with China started rising again amid the US House passed a bill on Hong Kong, which requires a review of the situation in the city on annual basis to keep its special status in place. Needless to say that Beijing didn’t like the US sticking its nose into its internal affairs at all, and threatened to retaliate.

Before that, Chinese officials had said that they would buy massive amounts of US farm products, only if the US removed the tariffs on its exports. Here, we are talking about roughly $ 40 / 50 billion US dollar worth of US farm products, versus $ 20 billion purchased in 2017, before the trade relations between the two countries deteriorated. But that dream of Trump’s could turn out to be fiction.

As such, the optimism regarding a possible trade deal between the US and China has been shot down within a couple of days after the Washington negotiations. It looks like trouble is brewing again on the US-China trade front.

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

There’s lots of jitteriness in the markets today, as optimism of a breakthrough in the US-China trade war fade … and Brexit heads towards a climax.

Last weekend, Donald Trump claimed to have pulled off “one of the biggest deals that’s been made in a long time, with China.” But it’s now clear that the ‘deal’ doesn’t really exist – nothing’s been signed yet, and thorny issues such as China’s habit of forcing US companies to hand over technology secrets haven’t been addressed at all.

Such details might not matter to a president hungry for success. But theydomatter to investors, especially as tensions between Washington and Beijing are on the rise again today.

Overnight, the US House of Representatives passed a bill that aims to defend civil rights in Hong Kong. The bill would end the territory’s special trading status with America, unless the US was happy that it respected human rights and the rule of law.

China is deeply unhappy; overnight, it’s threatened to retaliate if the bill is also passed by the Senate, and made into law.

Any retaliation would escalate tensions between the two countries, and surely undermine efforts to actually end the trade war.

In an early warning shot, Beijing has fixed the yuan at its lowest level in a month, at 7. 0746 yuan to the dollar.

Anxiety over the trade situation is likely to pull the US stock market down today. It had rallied on Tuesday, after strong results from UnitedHealth Group and JPMorgan Chase calmed recession fears.

The agenda

9. 30 am BST: UK consumer price inflation for September: expected to rise to 1.8% year-on-year from 1.7%
• 10 am BST: Eurozone consumer price inflation for September: expected to dip to 0.9% y / y from 1.0%

(1.) pm BST: IMF releases its Global Financial Stability Report