Donald Trump has spooked the markets once again with his latest flurry of tariffs, says Connor Campbell of SpreadEx.
Oh Donald, Donald, Donald. With the markets having done their best to maintain a positive outlook on the US-China situation, despite Hong Kong becoming a political pawn between the two sides, Trump went and added another couple of enemies to his trade war portfolio.
Delivering the news via, where else, Twitter, the President said that ‘effective immediately’ he would be restoring tariffs on all steel and aluminium imports from Brazil and Argentina. This as Trump claimed those countries had been ‘presiding over a massive devaluation of their currencies’ that was ‘not good’ for American farmers. Never missing a chance to attack Jerome Powell at the Federal Reserve, he ended the announcement by haranguing the central bank about lowering rates and loosening monetary policy to weaken the dollar.
European markets are also sliding in late trading, as trade jitters hit stocks.
The FTSE 100 is down 68 points, or nearly 1%, with heavier losses in other markets….
Donald Trump’s secretary of commerce, Wilbur Ross, has warned that America would impose fresh tariffs on China if a trade deal isn’t agree.
He was speaking on Fox News a little while ago.
This is a change of tone from the White House — recently, officials have been talking up the prospects of a Phase One trade deal soon.
This has knocked Wall Street, where the S&P 500 is down 0.8% so far today.
Q: You say will make climate change one of the priorities of the ECB… do you have full support of that plan? How will you persuade counterparts at other central banks who think fighting the climate crisis is a fiscal issue? And what specific measures will you propose?
Christine Lagarde says there are several ways of “greening” the ECB’s work – including adding a climate crisis focus to its analytical work, the risk assessment it carries out, and its own pension fund management.
We are active in various forums, she continues. And the new strategic review will consider the ECB’s activity in those forums, such as the G20.
Lagarde: Rating agencies must consider climate emergency
Another MEP tackles Christine Lagarde on the ECB’s commitment to the climate crisis.
He points out that the ECB’s stimulus scheme has bought more bonds from the automotive industry, and from energy companies, than the market average, while neglecting the renewables industry.
Q: will you put pressure on rating agencies, and your own risk measures, to take climate change into account within refinancing operations?
Lagarde replies that it is “very important that all rating agencies take climate change into account” when assessing credit-worthiness.
[That’s Moody’s, Fitch and S&P].
I would hope that the three big, well known rating agencies move in that direction. If they ask me my views, I will tell them.
Lagarde repeats that “we need to have a debate” about the ECB’s market neutrality principle, which prevents it from overtly assisting green policies.
We need to review the instruments and the tools, to ask ourselves about their appropriateness and the role that climate change should play in our decisions, she adds.
All these issues will be considered through a new strategic review which Lagarde is launching. She’s keen not to pre-empt (or be seen to pre-empt) its conclusions.
When it comes to strategic review, it needs to be debated by all members of the governing council….I’m not running a single-woman shop.
Lagarde then denies that the ECB is making the climate crisis worse via its bond-buying stimulus programme.
She argues that by improving financial conditions in the eurozone, the ECB is helping companies to fund new, greener projects.
Back in Brussels, Christine Lagarde is being challenged about her commitment to the climate emergency.
“Clear, precise and rapid actions” are needed, one MEP points out, so what action will the ECB actually take?
And isn’t the ECB actually fuelling the climate crisis, by buying the debt of energy firms such as Shell and Total through its bond-buying stimulus scheme?
Q: How can we finance investments to get rid of dirty, brown investments on the other side, and get the ECB out of carbon assets?
In response, Lagarde agrees that the ECB’s bond portfolio contains “multiple shades from green to brown”. That’s due to the policy of ‘market neutrality’, which means the Bank cannot use its stimulus programme to support green policies.
Should this policy be revised? How? That will be part of the review that we need to conduct, Lagarde says.
Some critics have argued that this market neutrality policy is hampering the fight against the climate crisis, as it means the ECB must buy bonds issued by heavy polluters as part of its QE programme.
Lagarde also reiterates that the ECB needs to “embed climate change imperatives” in its work, including its economic forecasting.
ISM: US manufacturing downturn continues
Newsflash: America’s factory output contracted last month, according to the closely-watched ISM survey.
The ISM’s US manufacturing PMI fell to 48.1 from 48.3, showing a sharper fall in output, back towards the 10-year low seen in September.
Lagarde: ECB must help fight climate emergency
Fighting the climate crisis has to be a central part of the European Central Bank’s policy-making, Christine Lagarde says.
The Bank’s new president tells the EU Committee on Economic and Monetary Affairs that all individuals must do everything they can to tackle climate issues.
The primary mandate of the European Central Bank is not about climate change, but price stability, Lagarde points out. But the ECB does have other, secondary, objectives – and this is where it can make a difference.
Climate change must be is a key element on how, when, and why the ECB takes certain decisions, she declares, citing two examples.
1) The ECB’s macro-economic modelling which generates its economic forecasts. “These models need to incorporate the risk of climate change,” says Lagarde. “That’s the very least, I think, we should expect.”
2) The ECB’s supervisory role within the eurozone financial system. The Bank should also look into whether financial institutions are taking climate change into account when making their decisions, she adds.
This would be a change in policy. Lagarde’s predecessor, Mario Draghi, did not prioritise climate issues — focusing instead on fighting the eurozone debt crisis and trying to stimulate its economy.
Christine Lagarde is urged the European Parliament to help tackle the gender imbalance on the ECB’s governing council, during her testimony in Brussels.
Currently, Lagarde is the only woman on the 25-strong governing council, as its chair.
She points out that 19 of those members are male – the 19 central bank governors for each eurozone country.
You could push the authorities to start appointing female central bankers — I’ve got some names if it would help — Lagarde tells the Committee on Economic and Monetary Affairs.
She adds that she would not like to be alone as the only woman on the Council for too long.
Lagarde: Global factors are hurting the eurozone
Newsflash: Christine Lagarde, the eurozone’s new top central banker, has warned that Europe’s economy remains weak due to ‘global factors’.
She doesn’t spell it out, but one obvious global factor is the trade conflicts triggered by the US in recent years, both with China and Europe, and now Brazil and Argentina too.
In testimony to the European Parliament, the ECB’s president says:
Euro area growth remains weak, with gross domestic product growing by only 0.2%, quarter on quarter, in the third quarter of 2019. This weakness has been mainly due to global factors.
The world economy outlook remains sluggish and uncertain. This lowers demand for euro area goods and services and also affects business sentiment and investment.
As the sector most directly exposed to these global developments, the manufacturing industry has been suffering the most. We are also seeing signs of spillovers to other parts of the economy, with recent survey data pointing to some moderation in the services sector.
Lagarde adds that the ECB will do what it can to protect the eurozone economy and help it grow, citing the new stimulus measures launched this summer.
Lagarde’s session hasn’t started yet, but will be streamed live, here.