LAST WEEK – KEY TAKEAWAYS

FTSE 100 UP AND POUND DOWN AS UK MANUFACTURING OUTPUT SHRINKS

• UK industrial production fell by 0.8% in May, dragged down by a 1.4% slide in manufacturing.

• Total UK trade deficit widened by £1.9bn to £9.7bn in the three months to April 2018, due mainly to falling exports.

• Weak economic data hit the value of the pound on Monday morning (11 June), though the FTSE 100 rallied as most revenues are generated by these blue-chip companies outside of the UK.

• The Omnis view: uncertainty around Brexit is likely to be a big contributing factor behind the slowdown, though big multinationals listed in the UK are less likely to feel the pinch than smaller domestically focused stocks.

HOUSE OF FRASER AND POUNDWORLD LATEST CASUALTIES OF HIGH STREET SLOWDOWN

• House of Fraser announces 31 store closures and Poundworld goes into administration in tough environment for UK retailers. 

• Maplin and Toys ‘R’ US both fell into administration earlier this year, while other names have cut stores.

• Latest retail sales data for May is due to be released by the Office for National Statistics on Thursday.

• The Omnis view: that the high street is suffering is not new news, and for listed retailers much of the bad news is already priced in to stock valuations. 

TRUMP LASHES OUT AT FELLOW G7 LEADERS AFTER CANADA SUMMIT…

• Trump backtracks on signing a G7 communique covering the need for “free, fair and mutually beneficial trade”.

• US president brands Canadian counterpart Justin Trudeau “very dishonest and weak” after he rejected US demands for a ‘sunset clause’ in the North American trade agreement.

• French president Emmanuel Macron tweets that an “isolated” US faced a “united front” from its allies.

• The Omnis view: while threats of more trade tariffs are worrying for global trade and diplomatic relations, stock markets have not been negatively impacted by the events of the weekend.

…AS EU RETALIATES TO US STEEL AND ALUMINIUM TARIFFS

• From July, the European Commission will push ahead with tariffs on a list of US goods, including whisky, jeans and Harley-Davidson motorbikes.  

• The move is in retaliation to Washington’s 25% tariffs to European steel exports, and 10% tariffs on aluminium, which came into effect on 1 June.

• European commission said it had the full support of all 28 member states to act.

• The Omnis view: this move has been anticipated by markets ever since Trump first announced his metal tariffs on 1 March, while EU officials stressed last week that they wanted to avoid any further escalation or widening of the trade war.

CHINA TRADE DATA BEATS EXPECTATIONS AS IMPORTS JUMP

• China maintained solid export growth of 12.6% in May to $213bn, while imports grew 26% to an all-time high of $188bn, beating analysts’ forecasts.

• The data came as China pledged to its trade partners, including the US, that steps would be taken to increase imports.

• The General Administration of Customs data also showed that the May trade surplus with the US widened to $24.6bn.

• The Omnis view: China is the world’s largest exporter, and has so far been resilient to US trade tariffs. However, the third round of talks between the two countries earlier in June showed few signs of progress in halting a trade war.

LOOKING AHEAD - TALKING POINTS

KEY WEEK FOR BREXIT AS MPS VOTE ON EU WITHDRAWAL BILL

• On Tuesday, MPs will vote on legislation aimed at ensuring a smooth transition after Brexit day on 29 March 2019.

• The EU Withdrawal Bill is back before the House of Commons after 15 defeats by the House of Lords.

• The government could be vulnerable on key measures including the customs union and a requirement for Parliament to have a decisive say over what happens next if it rejects a final Brexit deal.

• The Omnis view: Brexit is back in the spotlight with time running out before October’s EU summit at which both the UK and the EU hope to agree an outline of future relations.

BREXIT IMPLEMENTATION SCENARIOS

 

Source: Institute for Government analysis

DONALD TRUMP AND KIM JONG-UN SET FOR SINGAPORE SUMMIT

• While many doubted they would happen, the two world leaders have both arrived in Singapore for historic talks, due to begin on Tuesday. 

• Hopes are high that the meeting will kick-start a process that will see North Korea give up its nuclear weapons.

• Pyongyang could also open up the North Korean economy to global trade, though there are no official statistics on its real size.

• The Omnis view: North Korean denuclearisation could be exchanged for economic and diplomatic rewards from the US in the long term.

NORTH KOREA EXPORTS (£M) – 2008 TO 2018

 

Source: International Trade Centre, tradingeconomics.com