Global markets show little reaction to escalating trade war between the US and China

The Trump administration announced 10 per cent tariffs on about $200bn worth of Chinese imports, beginning next week, holding off from the expected 25 per cent tariff rate for now (the US has already imposed 25 per cent levies on about $50bn of Chinese imports this year, which triggered retaliation from Beijing on the same amount of US imports).

Beijing retaliated by slapping new tariffs of between 5 per cent and 10 per cent on $60bn of American goods, but is ready to negotiate an end to the trade tensions with the US. President Donald Trump, meanwhile, warned he was willing to impose yet another round of duties, affecting all China’s exports to the US, if Beijing targeted US farmers and industrial workers (Chinese exports to the US valued at more than $500bn last year).

2. Argentina’s government presented its austerity programme to congress on Monday, which aimed at eliminating the primary budget deficit – before interest payments on debt – next year. Buenos Aires and the International Monetary Fund are negotiating over President Mauricio Macri’s government’s request to reinforce a $50bn bailout package announced in June. The economy is now in recession. Receiving the financing will allow the government to bolster confidence.

3. Russia’s central bank raised its benchmark lending rate by 0.25 percentage points to 7.50 per cent on Friday, the first rate hike in almost four years. The move came after inflation rose to 3.1 per cent on August.

4. Turkey’s central bank lifted the one-week repo rate from 17.75 per cent to 24 per cent on Thursday, higher than markets had expected. Turkey is one of the most vulnerable emerging markets, because of its heavy dependence on foreign debt.

4. The European Central Bank confirmed on Thursday that it would reduce its monthly bond purchases from €30 billion to €15 billion from October until the end of the year. The bank’s quantitative easing programme is widely credited with reviving the once-stricken eurozone economy. Interest rates are expected to stay at record lows through the summer of 2020 (the ECB’s main refinancing rate is at zero). The ECB expects growth of 2 per cent this year, 1.8 per cent in 2019 and 1.7 per cent in 2020.

• Global markets largely shrugged off the escalating trade war between the US and China. Hong Kong’s Hang Seng index closed up 0.6 per cent. The CSI 300, comprising big companies listed in Shanghai and Shenzhen, jumped 2 per cent. The Europe-wide Stoxx 600 index finished 0.1 per cent higher as the Xetra Dax in Frankfurt gained 0.5 per cent and London’s FTSE 100 ended the session flat. The S&P 500 added 0.5 per cent. The Dow Jones Industrial Average was up 0.7 per cent while the tech-heavy Nasdaq Composite gained 0.8 per cent.
• The dollar index was up 0.2 per cent at 94.65 as the euro shed 0.1 per cent to $1.1667 and sterling was 0.1 per cent softer versus the US unit at $1.3140. The greenback was 0.4 per cent firmer against the yen at ¥112.35.
• The yield on the 10-year US Treasury was up 6 basis points at 3.05 per cent, its the highest level since May, while the two-year yield was 2bp higher at 2.80 per cent. The yield on the German 10-year Bund climbed 2bp to 0.48 per cent. Yields move in the opposite direction to prices.
• Brent crude was up 1.2 per cent at $78.97 a barrel. US West Texas Intermediate traded 1.4 per cent higher at $69.85.