LONDON BRIEFING: Powerhouse Economies Of China And Germany Weaken

(Alliance News) - The US gave markets a boost on Tuesday by delaying the imposition of new ...

Alliance News 14 August, 2019 | 8:13AM
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(Alliance News) - The US gave markets a boost on Tuesday by delaying the imposition of new tariffs on some Chinese products, but China's economy continued to show the affects of the trade war between the two countries, according to data released Wednesday.

Meanwhile, German emerged as a new source of concern for the global economy, with data released early Wednesday showing GDP shrank in the second quarter. The report came ahead of a eurozone GDP release due at 1000 BST.

Here is what you need to know at the London market open Wednesday:
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MARKETS
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FTSE 100: up 0.2% at 7,262.30
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Hang Seng: flat at 25,281.62
Nikkei 225: closed up 1.0% at 20,655.13
DJIA: closed up 372.54 points, 1.4%, at 26,279.91
S&P 500: closed up 1.5% at 2,926.32
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GBP: flat at USD1.2060 (USD1.2062)
EUR: soft at USD1.1176 (USD1.1190)

Gold: soft at USD1,497.12 per ounce (USD1,502.50)
Oil (Brent): unchanged at USD60.84 a barrel

(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come

0930 BST UK consumer and producer price indices
0930 BST UK house price index

1100 CEST EU industrial production
1100 CEST EU flash estimate gross domestic product
1100 CEST EU flash estimate employment EU and euro area

0700 EDT US MBA weekly Mortgage Applications Survey
0830 EDT US import and export price indices
1030 EDT US EIA weekly Petroleum Status Report
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The US is delaying until December 15 the imposition of new 10% tariffs on Chinese electronics, but is going ahead with new duties starting September 1 on USD300 billion in Chinese goods, the government announced Tuesday. As Washington and Beijing work to resolve the escalating trade war, US Trade Representative Robert Lighthizer spoke with Chinese Vice Premier Liu He early Tuesday and has another call planned in two weeks, a USTR official told AFP. The latest round of tariffs, which President Donald Trump announced on August 1, mean all Chinese imports into the US would be subject to additional duties. The sides were due to hold another round of meetings in Washington in September, but the deterioration in relations in the past two weeks cast doubt on whether the negotiations would take place.
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China's economy showed further signs of strain in July with output at its factories falling to its lowest level in 17 years, while investment and retail sales also slowed, official data showed. The figures are the latest to highlight how the world's second-largest economy is being battered by an escalating trade war with the US, weak global demand and deteriorating conditions at home. Industrial output increased 4.8% on-year in July, down from 6.3% in June and marking the weakest pace since 2002. "Given the complicated and grave external environment and the mounting downward pressure on the economy at home, the foundation for sustainable and healthy growth of the economy still needs to be consolidated," said Liu Aihua, a spokeswoman for the National Bureau of Statistics, which released the data.
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Japan's core machinery orders rose for the first time in two months, jumping 14% in June from the previous month, the government said. The reading beat the median forecast of a 1.5% fall by analysts surveyed by the Nikkei Business Daily, and followed a 7.8% decline in May. Core private sector machinery orders, which exclude volatile categories such as ships and utilities, grew to JPY960.3 billion, about USD9 billion, the Cabinet Office said. The statistic is considered an indicator of future capital spending.
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Germany's economy contracted in the second quarter of the year. Quarter-on-quarter, gross domestic product slipped 0.1%, figures from Destatis showed. This was in line with consensus, as cited by FXStreet, for a 0.1% decline and reverses the 0.4% growth posted for the first three months of the year. On an annual basis, GDP was flat in the three months to June, beating expectations for a 0.3% decline. In the first quarter, the economy had grown 0.8%. With this latest data, Germany is now "teetering on the edge of recession", said Capital Economics. "Early signs for Q3 look ominous. Manufacturing business surveys for July were all gloomy, as was the ZEW survey for August, published yesterday. And while the services sector should continue to hold up better, there are some signs that the slump is spreading to the labour market," Capital Economics said.
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Boris Johnson would commit a betrayal of the referendum if he enacted a no-deal Brexit by listening to the "unelected" saboteurs "who pull the strings" of his government, former UK chancellor Philip Hammond has argued. Hammond, who resigned in anticipation of Johnson becoming prime minister, urged the Tory leader to take the UK out of the EU with a deal in place. But he said early signs for that "are not encouraging", warning that demands to abolish the backstop had become a "wrecking" stance over a deal. "The unelected people who pull the strings of this government know that this is a demand the EU cannot and will not accede to," the Tory backbencher wrote in The Times on Wednesday. Meanwhile, Speaker John Bercow warned he "will fight with every breath in my body" any attempt by the PM to suspend Parliament to force through no-deal against MPs' wishes.
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BROKER RATING CHANGES
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MACQUARIE CUTS RBS TO 'NEUTRAL' (OUTPERFORM) - PRICE TARGET 201 (246) PENCE
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COMPANIES - FTSE 100
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Insurer Admiral said interim profit rose despite a headwind from the Ogden rate, which helps determine the size of personal injury damage awards. Net revenue rose to GBP647.1 million from GBP598.1 million, while pretax profit increased 4% to GBP218.2 million from GBP210.7 million. The insurer declared an interim dividend of 63.0p per share, up 5% year-on-year, comprising a normal dividend of 41.8p and a special dividend of 21.2p. "If it's a can't-put-down, read-in-one-go page-turner that you're after, then I'm afraid our half-year results don't fit the bill. Frankly, they are a bit dull. Turnover up mid-single digits, profit up low-single digits. Hardly 'hold the front page'," said Chief Executive David Stevens. He continued: "However, for dedicated aficionados who look behind the headlines, there's some reward for reading on. Profit growth, even if modest, is more exciting considering the GBP33 million Ogden headwind."
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Standard Life Aberdeen said it has sold a 3.3% stake in HDFC Life Insurance Co, Standard Life's Indian insurance joint venture. The shares were sold through a wholly-owned subsidiary of Standard Life at an average price of INR480.70, which will result in Standard Life receiving INR32.0 billion - or around GBP374 million - from the sale. Standard Life still holds a 19.7% stake in HDFC, worth around GBP2.3 billion.
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An ad for Lidl has been banned for misleading customers over the potential savings they could make compared with Tesco. The press ad, seen in the Belfast Telegraph between January 15 and January 19, stated: "Save GBP46* versus the same shop in Tesco." The ad showed two supermarket trolleys filled with different products with text above one stating "Lidl GBP67", and the other stating "Tesco GBP113". Tesco complained that the ad misled shoppers by comparing branded products it sold with own-brand products at Lidl, even when in some cases Lidl sold the branded product.
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COMPANIES - FTSE 250
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Sports Direct International said that Grant Thornton has decided not to seek reappointment as the retailer's auditor. Grant Thornton will cease to be Sports Direct's auditor from September 11, the date of the company's annual general meeting. Sports Direct said Grant Thornton made the decision "following a review of its client portfolio".
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Construction firm Balfour Beatty backed its annual guidance as it reported a rise in interim profit and boosted its dividend by almost a third. Revenue for the first half rose to GBP3.40 billion from GBP3.22 billion, leading pretax profit to increase to GBP63 million from GBP50 million. The company's order book increased 5% to GBP13.2 billion, with Balfour Beatty saying its focus on "disciplined bidding" is building a "higher quality" order book. It boosted its interim dividend by 31% to 2.1p.
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FirstGroup said its joint venture with Trenitalia has been awarded the new West Coast Partnership by the UK Department for Transport. The partnership will commence from December 2019, and will see the joint venture operate existing InterCity West Coast services while providing a services as a shadow operator to the High Speed 2 programme to March 2026. First TrenitaliaWest Coast Rail then will operate HS2 and the reshaped InterCity West Coast rail services together as an integrated operation in the second phase, from March 2026 until March 2031, under a management contract.
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COMPANIES - INTERNATIONAL
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After some false starts, CBS and Viacom announced Tuesday they will combine to form the latest media empire in a wave of mergers driven by the need for companies to reformulate themselves for the streaming era. The new company will have more than USD28 billion in revenue and comprise brands such as MTV, Comedy Central and Showtime, as well as Paramount Pictures and publisher Simon & Schuster. Under the all-stock transaction in the latest tie-up, existing CBS shareholders will own 61% of the company, while Viacom shareholders will own 39%. Bob Bakish, Chief Executive of Viacom, will assume that post in the newly-combined company, while Joe Ianniello, acting chief executive at CBS, will become chair & CEO of CBS, overseeing CBS-branded assets.
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US oil major Exxon Mobil is in talks to sell its assets in the North Sea for USD2.00 billion, the Guardian reported. Alongside Royal Dutch Shell, Exxon Mobil owns about 40 oil and gas fields in the UK basin, including the prolific Brent field. The Guardian reported that Ithaca Energy, which earlier in 2019 purchased North Sea assets owned by US energy firm Chevron, is one of the companies in talks with Exxon Mobil. Although a spokesperson declined to comment on the sale talks, the Guardian said that US companies are favouring backing out of the North Sea in order to focus on shale projects in North America. These projects offer a faster return on investment, the newspaper added.
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Hong Kong Exchanges & Clearing reported profit growth in the first half despite a fall in daily turnover in the Hong Kong stock exchange. In the six months to March 31, HKEX, which operates the stock and futures market in Hong Kong, reported a 3.3% rise in profit attributable to shareholders to HKD5.21 billion - around USD664 million - from HKD 5.04 billion - or around USD642 million - the year before. HKEX's first half revenue & other income grew 4.8% to HKD8.58 billion from HKD8.19 billion the year before.
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Wednesday's Shareholder Meetings

Gore Street Energy
John Laing Environmental
Creightons
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By Tom Waite; thomaslwaite@alliancenews.com

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
The Royal Bank of Scotland Group PLC 182.95 GBX -0.30
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