Rolling coverage of the latest economic and financial news, as experts express concerns over Donald Trump’s Phase One trade deal with China

The FTSE 100 index has closed down 32 points, dragged down by that profit warning from Pearson (-8%). Whitbread (-5.1%) was another big faller, after telling shareholders that demand for regional hotels is weak.

Germany’s DAX ended the day flat, not helped by warnings that its factories are still in recession, while France’s CAC gained a mere 0.1%.

The FTSE 100 is underperforming against its Continental counterparts as healthcare and consumer stocks have lost the most ground. Broadly speaking, volatility in Europe has been low in the wake of the US-China trade deal having been signed yesterday.

The interim trade agreement between the two largest economies in the world took a long time to be hammered out, so now dealers are wondering what will be the next big story to move the markets. Bullish sentiment has been in short supply, but then again, the bears have been quiet too.

And having analysed the deal, they’re also not-too impressed. The deal is better than nothing, but doesn’t end the trade war that has hurt the global economy for more than 18 months.

Oxford Economics also suspect that China will struggle to buy the $200bn of US goods it has promised -- and if they do, it will come at the expense of other countries.

A late newsflash: The United Nations has warned that the global economy is weak -- which will undermine efforts to tackle the climate emergency.

The warning comes in a new report, just released. My colleague Richard Partington has read it, and reports:

The world economy risks suffering a sharp slowdown in 2020 that would derail international efforts to tackle the mounting climate emergency and heightened poverty around the world, the United Nations has warned.

In a flagship report ahead of the annual gathering of world leaders in Davos next week, the international governmental organisation sounded the alarm that trade tensions between major countries threatened to serve as a brake on growth, with damaging consequences for sustainable development.

The UN said that rumbling trade tensions between the US and China had dragged down economic growth in 2019 to the lowest level in a decade, with the prospect that a renewed flareup, financial turmoil, or an escalation of geopolitical tensions could derail a recovery this year.

The warning comes after Donald Trump signed the first phase of a new trade deal with China on Tuesday, dialling-down the trade standoff between the world’s two biggest economic superpowers.

Although the UN said that easing trade tensions should help to propel global GDP growth to around 2.5% this year from a ten-year low of 2.3% in 2019, it warned the potential for relapse was high.

Failure to keep the risks in check would mean GDP growth in 2020 slumping to around 1.8%, with a knock-on consequences for government efforts to hit their sustainable development goals, it added.

António Guterres, secretary-general of the UN, said: “These risks could inflict severe and long-lasting damage on development prospects. They also threaten to encourage a further rise in inward-looking policies, at a point when global cooperation is paramount.”

Donald Trump has now claimed that US farmers are delighted with his trade deal, and have also benefitted from the tariffs on Chinese goods.

The farmers are really happy with the new China Trade Deal and the soon to be signed deal with Mexico and Canada, but I hope the thing they will most remember is the fact that I was able to take massive incoming Tariff money and use it to help them get through the tough times!

I’m not sure all the farmers are happy, though. The National Farmers Union said last night that it fears all the pain since 2018 has not been worth it.

The pork and beef industry were more positive, hoping to sell more of their wares to Chinese consumers. National Cattlemen’s Beef Association President Jennifer Houston called it a “game changer”.

However.... Trump’s claim that he’s been using tariff proceeds to help the farmers also smells suspicious. Those tariffs are paid by companies who import goods, and consumers through higher prices -- unless Chinese firms agree to cut their prices (not always possible, while remaining competitive).

Gotta love a little socialism distribution of wealth. Take tariffs proceeds paid by US companies (not China) and redistribute to farmers in states that Trump needs to win in 2020. Trump is a master at sales and marketing. https://t.co/JAukWsklV8

Breaking! Ryanair has launched a stinging attack on the UK government’s rescue of regional airline Flybe.

In a strongly worded letter, Ryanair’s CEO Michael O’Leary says the deal (which reportedly to include a delay to its air passenger duty bill) violates competition law and state aid rules.

O’Leary also puts the boot into Flybe’s owners, including Sir Richard Branson, saying they don’t deserve to have their ‘unviable’ airline rescued.

“This Government bailout of the billionaire owned Flybe is in breach of both Competition and State Aid laws. The Flybe model is not viable which is why its billionaire owners are looking for a state subsidy for their failed investment.

The reason why Flybe isn’t viable is because it cannot compete with lower fare services from UK regional airports on domestic and EU routes provided by Ryanair, Easyjet, BA and others; and it cannot compete with lower cost road and rail alternatives on many smaller UK domestic routes. If Flybe fails (as it undoubtedly will once this Government subsidy ends) then Ryanair, Easyjet, BA and others will step in and provide lower fare flights from the UK regional airports, as we already have to make up for the recent failure of Thomas Cook Airways.

This Flybe ‘subsidy’ cannot comply with Competition, or State Aid rules unless the same APD eco tax holiday and other Government subsidies are extended to all other UK competitor airlines including Ryanair, Easyjet, BA among others.”

The S&P 500, which covers a broader range of US companies than the Dow, has also hit a record high -- up 14.96 points at 3,304.

Wall Street has opened at a new record high, as the bull market shows no signs of running out of energy.

The Dow Jones Industrial Average jumped by 125 points as the first buy and sell orders fly, hitting 29,155 for the firs time.

Traders can keep their “Dow 29,000” hats on (legendary trader Peter Tuchman probably slept in his.)

US Opening Calls:#DOW 29155 +0.39%#SPX 3304 +0.42%#NASDAQ 9080 +0.46%#RUSSELL 1697 +0.77%#FANG 3355 +0.24%#IGOpeningCall

Relief that the Phase One trade deal is signed (despite its flaws), and today’s strong retail sales and jobless data, is cheering the markets.

Mark Carney has just been appointed as Boris Johnson’s finance advisor for the COP26 climate emergency conference, being held in Glasgow this November.

Carney’s challenge is to mobilise “ambitious action from across the financial system”, to help keep global warming within the 1.5°C target set in the Paris Agreement.

This will include building a framework in which companies can report their climate impact, and manage the risk of a changing climate. That will help private investors factor in climate change when they are investing their money.

It’s a vital issue for companies -- earlier this week, BlackRock finally agreed to put climate at the heart of its investment strategy.

It’s a good job for Carney to do -- he appears to understands the scale of the crisis, recently warning that some assets will be made worthless by the climate emergency).

The combination of these critical meetings and the UK’s global leadership in financial services provides a unique opportunity to address climate change by transforming the financial system.

To seize it, all financial decisions need to take into account the risks from climate change and the opportunities from the transition to a net zero economy. The UK has a plan to do just that, and I look forward to working with the private sector, HM Government, the Bank of England and all stakeholders to help make this promise of sustainable finance a reality.

The president has just tweeted that the Phase One agreement with China is “one of the greatest trade deals ever made” (despite not really addressing America’s major concerns about China).

Trump also claims that $250bn will be coming into America; the deal actually says China will buy at least $200bn more stuff.

One of the greatest trade deals ever made! Also good for China and our long term relationship. 250 Billion Dollars will be coming back to our Country, and we are now in a great position for a Phase Two start. There has never been anything like this in U.S. history! USMCA NEXT!

Car sales across the EU jumped by 21.4% year-on-year in December, new industry figures showed this morning. Demand was sharply higher in France, Germany, the Netherlands and Sweden.

European consumers also flocked to Primark stores; the discount chain reported a 5.1% jump in eurozone sales over Christmas, helped by “strong progress in France and Italy”.

Breaking: US retail sales have risen, and the number of Americans signing on for jobless benefit has fallen.

In news that will please Donald Trump, retail sales jumped by 0.3% in December. They rose by a healthier 0.7% if you strip out cars purchases, suggesting that consumers continued to spend over the festive period.

US Retail Sales (M/M) Dec 0.3% (est 0.3%; prevR 0.3%; prev 0.2%)-US Retail Sales Ex. Auto (M/M) Dec 0.7% (est 0.5%; prev 0.1%)

The initial claims figure -- showing how many people applied for state unemployment benefits -- dropped 10,000 to a seasonally adjusted 204,000. That’s a really low figure, showing US firms aren’t slashing their workforce despite the drag from the trade war.

Financial analyst and journalist Louise Cooper has analysed the US-China trade deal, and concluded that Xi Jinping and Liu He have done Donald Trump up like a kipper.

She reckons that most of China’s ‘concessions’ actually suit Beijing jolly nicely (you can read the agreement here).

For example, pledging to buy US food is a no-brainer, when China is suffering from food scandals and a swine fever epidemic.

Four whole pages of the deal relate to dairy and infant food formula - an area where China really needs US help.

In a trade agreement of just 46 written pages, four pages are for dairy and infant formula! That is extraordinary. And it reflects Beijing’s concerns not the interests of America!

FYI China had a baby milk formula scandal over a decade ago that saw Chinese babies die. 22 Chinese companies were involved and still now Chinese parents don’t trust Chinese made formula:

China has also promised to allow parties in civil dispute to call witnesses, and cross-examine them. That will help to develop its legal system - handy in a more developed economy.

And on forced technology transfers, China is pledging not to put pressure on US companies to hand over their secrets in return for approving a deal or joint venture.

This section is two pages long because many American companies will decide it is a worthwhile trade to do this. And it is very difficult to police. Which company would complain to Washington if they knew their complaint would get back to Beijing and they may be restricted from operating in the country for years?

In conclusion, Cooper reckons that Trump (who was crowing about his deal yesterday), has actually been easily manipulated.

I believe this trade agreement reflects the man. His inability to read much documentation, his short attention span, his inability to look into detail. But still to believe in his own brilliance and expertise.

Revenues were sharply higher across the company, hitting record levels, with its investment banking and sales trading both growing their turnover.

And Fixed-Income (bond-trading) had a stellar quarter, with revenues more than doubling (to $1.273bn, from $564m).

BREAKING: Morgan Stanley Q4 Earnings: -Revenue: $10.9B (est $9.48B)-Net Interest Income: $1.43B (est $1.03B)-Investment Banking Revenue: $1.70B (est $1.41B)-FICC Sales & Trading Revenue: $1.27B (est $944.4M)Very Solid Numbers From $MSShares +1.7% PM. pic.twitter.com/OBuzNUH2bi

Back in the UK, my colleague Rob Davies has another fascinating scoop into Britain’s gambling industry:

The brothers who own high street bookmaker Betfred are making millions from a business that provides treatment for health problems, including gambling addiction for public sector staff, the Guardian can disclose.

Betfred’s owners, the billionaire Tory party donors Fred and Peter Done, also own Health Assured, which holds dozens of government contracts to provide staff health and wellbeing programmes.

Its taxpayer-funded clients include multiple NHS trusts that also treat gambling addicts as well as staff working for MPs, some of whom campaign for tighter restrictions on gambling.

This is unbelievable... Great scoop from ⁦@ByRobDavies⁩ - Betfred owners make millions from company treating gambling addicts https://t.co/2eN71coVuA

Germany’s industrial heartland is still locked in recession, according to a fresh warning from its manufacturers.

Dieter Kempf, president of the BDI industry body, told its annual conference today that there is no sign of an upturn, following a grim 2019.

Overall, BDI (the Federation of German Industries) only expects Germany to grow by 0.5% this year -- partly helped by an increase in working days.

Germany has suffered badly from the US-China trade war, with weaker global growth meaning less demand for German-made heavy-duty machinery.

It has also suffered from the slowdown in the eurozone, and structural problems in its car industry (the move away from polluting diesel cars to electric models).

BDI is calling for Berlin to implement a big new public infrastructure project to boost growth (and give its members more work to do).

BDI'S KEMPF CALLS ON GERMAN GOVERNMENT TO IMPLEMENT MASSIVE INVESTMENT PROGRAMME IN INFRASTRUCTURE OVER NEXT 10 YEARS TO BOOST GDP GROWTH

Stark words from #German Industry Group BDI this morning: "German industry is stuck in recession, no signs of bottoming out" + call on German government to cut corp taxes and implement massive investment programme in infrastructure over the next 10yrs to boost GDP

1. A few bits from today's BoE credit conditions survey for 2019 Q4. In the mortgage market, banks were making credit more available (in pursuit of market share objectives) while demand fell a bit. pic.twitter.com/ksgUOJHRO8

2. Some further signs that consumer credit growth continued decelerate. Both availability and demand fell in Q4. Expectations for Q1 are that demand will pick up while availability will be tightened further. pic.twitter.com/1TimnH0rGX

3. And it's good to see that mortgage default rates fell in Q4 and are expected to fall further in Q1 2020. Overall unsecured default rates were broadly unchanged, although the BoE did record a rise in default rates on non-credit card borrowing. pic.twitter.com/9ALPLjxlex

Getting back to the US-China trade deal.... and Chinese officials have been denying that the agreement is a damp squib.

Foreign Ministry spokesman Geng Shuang told reporters that the Phase 1 agreement was good for both countries and the world, playing down concerns that China hasn’t got much out of the deal.

An editorial in the Global Times, a tabloid run by the People’s Daily, stated that debating “about who had lost or gained is shallow.”

“We urge individuals and forces to exercise some restraint in their nitpicking of the agreement and bad-mouthing future trade negotiations,” it wrote.

The Bank of England’s latest survey of credit conditions is out, and shows that demand for loans fell in the last quarter.

Demand for credit cards, mortgages and corporate loans all fell in the last three months -- a sign that households and companies were nervous ahead of December’s election and the Brexit deadline later this month.

Commercial banks reported that they expect demand for credit cards to rise in the current quarter, while mortgage demand could keep dropping.

Lenders also expected demand for corporate lending in Q1 to increase slightly for small businesses and to decrease for medium and large businesses.

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