Daily Brief

Daily Brief

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Tariffs ahead

Trade war continues

Over the weekend and yesterday the purchasing managers' index readings from Chinese manufacturers improved to 50.2 and 51.8 for November. Meanwhile America's ISM manufacturing index was a point lower at 48.1. Perhaps the trade war is not going so well for Washington.

That did not discourage the US president from reopening the South American front with tariffs on steel and aluminium from Brazil and Argentina. He did so because, he said, the two countries "have been presiding over a massive devaluation of their currencies". Yes, the Argentine peso has fallen 47% against the US dollar this year and Brazil's real is down 8.5%, but the moves have not been internally engineered and are hardly going to be reversed by US tariffs.

There is now the prospect of increased tariffs on Chinese goods on 15 December if a trade deal has not been struck and the US administration is threatening $2.4 billion tariffs on goods including French cheese and lipstick. All in all, investors were not impressed, and they marked down both of the North American dollars. The US dollar is a quarter of a cent lower against sterling.

Better than feared

The manufacturing PMIs from Europe all exceeded analysts' forecasts. Only the French reading made it into the expansion zone above 50, coming in at a five-month high of 51.7. Britain's 48.9 was more than half a point above the provisional reading.

Everyone was watching out for the German figure and they were reassured to see that it had pulled itself up from the floor to a five-month high of 44.1. New orders fell at their slowest pace since January. For Euroland as a whole the manufacturing PMI was 46.9 and once again the strongest component was Greece's 54.1.

In Germany, Christine Lagarde, the new European Central Bank president, gave her first speech on policy. She said the ECB will be "resolute" in restoring price stability. Investors took that to mean continued relaxation of monetary policy and they marked down the euro. Even so, it was a third of a cent higher against sterling and up by half a US cent, on average unchanged against the other majors.

Trump in town

The US president is in London for the NATO summit meeting. He has no doubt been warned off endorsing the Prime Minister but that does not guarantee his silence on the matter. 

Overnight the Reserve Bank of Australia kept its Cash Rate benchmark unchanged at 0.75%, as expected. In its statement, the RBA said it was "prepared to ease monetary policy further if needed" but there seemed to be no sense of urgency. The Aussie strengthened as a result and is the day's top performer with a one-and-a-half-cent gain over sterling.

The ecostat agenda opened with the BRC reporting a 4.9% annual decline in like-for-like UK retail sales. "Once the figures are adjusted to take account of the timing of Black Friday, growth appears stronger in November than in previous months." The only other relevant statistic today is Britain's construction sector PMI.

GBP: Trump looms over election

GBP: Trump looms over election

USD: Trade war escalation weighs on dollar

USD: Trade war escalation weighs on dollar

BRL: Tariffs reimposed on steel and aluminium

BRL: Tariffs reimposed on steel and aluminium

EUR: Lagarde resolute on price stability

EUR: Lagarde resolute on price stability

AUD: RBA sticks at 0.75%

AUD: RBA sticks at 0.75%

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