US-China trade truce drives Wall Street to record closing high - as it happened

Boom! America’s S&P 500 index has closed at a new alltime high, although today’s rally did fade by the end of the session.

Wall Street investors have given a steady thumbs-up to Saturday’s news that China and the US will resume trade talks.

Here’s the closing prices:

• Dow Jones industrial average: up 111 points of 0.42% at 26,711
• S&P 500: up 22 points or 0.75% at 2,963.83 points
• Nasdaq: up 82.95 points or 1% at 8,089.19

Technology stocks led the way, on relief that America won’t impose new tariffs on electronics goods made in China. Financial stocks also gained, along with consumer goods makers and miners (whose commodities should be in higher demand without a trade war).

Goodnight! GW

Our news story on today’s market action is now live, here:

There’s a sharp contrast between the optimism in the markets, and the struggles in the world’s factories shown in today’s PMI data:

Fawad Razaqzada, Market Analyst at Forex.com, suspects the rally may fade:

The US-China trade optimism is driving the markets and the S&P 500 has opened at a fresh record, while safe havens gold, yen and franc have all fallen. Tech stocks jumped after Trump said he would allow US corporations to resume business dealings with Huawei on certain products after it was blacklisted earlier due to national security concerns.

But July has started with a negative note for global manufacturing data, after purchasing managers reported deteriorating conditions in several key economic regions including China and the US. Initially, this was shrugged off by a market buoyed by the latest developments regarding the US-China trade spat, after Trump said trade talks are back on track. However, since the start of the US session, we have seen a bit of a pullback from the highs. If this latest trade optimism fades completely, the focus will turn very quickly to the ailing global economy. As such, the S&P’s latest breakout to a new all-time high could be brief, especially as some of the positivity regarding trade talks was already priced in.

Just in: America’s manufacturing sector barely grew last month -- but that’s still good by global standards!

Data firm Markit has just reported that US factories remained in “near-stagnation” in June, due to weak output and cautious hiring.

Its US manufacturing PMI has come in at 50.6, up from 50.5 in May, but barely above the break-even point.

Markit explains:

The rate of overall growth held close to May’s near-decade low. On a positive note, the rate of output growth quickened slightly amid a renewed rise in new orders.

However, in line with muted increases in output, firms reined in staff hiring, expanding workforce numbers at the slowest pace for almost three years. Subsequently, output expectations remained subdued.

So, a weak result, but much better than Britain’s factories -- the UK PMI fell to just 48.0 earlier today. China’s manufacturing also contracted, with a PMI of 49.4, while the eurozone limped in with just 47.6.

Boom! The New York Stock Market has hit a fresh record high at the start of trading.

Investors are relieved that Donald Trump and Xi Jinping backed away from a deeper trade war, agreeing to restart negotiations during their meeting at the G20 last week.

With stocks surging, the S&P 500 index has hit a new intraday record high - up 34 points or 1.1% at 2,975 in early trading.

Technology stocks are among the top rises, after the US decided to relax some of the blacklist against China’s Huawei.

After a strong first half of the year, the markets have begun the second half powerfully too.....

Several experts are warning that the prolonged period of uncertainty over the UK’s exit from the European Union dragged the factory sector down last month.

Seamus Nevin, Chief Economist at Make UK, the manufacturers’ organisation, says:

“Today’s data proves that May’s plunge below the 50-threshold was not just a one-off with UK manufacturing activity collapsing to its lowest level in six and a half years.

Businesses are cutting back on both day-to-day and capital spending with the contraction in output a reflection of growing Brexit uncertainty and, worsening global trade winds.

Lee Collinson, Head of Manufacturing at Barclays, says politicians need to help:

Not only have manufacturers had to grapple with a prolonged period of uncertainty around Brexit, which has clearly impacted and delayed much needed investment decisions, but they also find themselves in the crosswinds of weakening demand from both home and overseas markets.

With production and new order flows falling last month, the sector is increasingly looking to Westminster for the clarity they crave on the future relationship with the EU.”

Justin Benson, UK Head of Automotive at KPMG, is also concerned -- as both candidates to replace Theresa May say they could take Britain out without a deal.

“The UK’s manufacturing sector is experiencing historic lows in investment. New products and ideas are not being invested in to the extent that they were three years ago. The highs the sector saw in the first quarter of 2019 were clearly to mitigate Brexit issues, with many stockpiling to avoid or reduce delays to lead times and to manage customer expectations.

“Right now UK manufacturers need certainty, however, at the moment there’s a high probability of a no-deal Brexit. The UK’s makers need to start preparing for this eventuality, if they haven’t done so already.”

The decline in UK factory output in June has driven the pound down to a 10-day low.

Sterling has shed half a cent against the US dollar to $1.2639, its weakest point since 20 June.

Newsflash: Britain’s factory sector has suffered its sharpest contraction in six years.

Data firm Markit’s UK manufacturing PMI, just released, is much worse than expected. The index has slumped to just 48.0, a 76-month low, showing that the sector shrank at a more rapid pace.

Companies reported that output and new orders both slumped in June, hitting business confidence.

One problem is that firms are now cutting their stockpiles, having furiously bought raw materials and parts earlier this year in case of a no-deal Brexit.

Markit says that Britain’s manufacturing downturn has deepened, as the UK PMI falls to lowest level since February 2013.

It explains:

The UK manufacturing sector continued to feel the reverberations of the unwinding of earlier pre-Brexit stockpiling activity during June. The already high stock levels at both manufacturers and their clients led to a scaling back of output and new order intakes, with demand from both domestic and export markets weakening.

Output was lowered in response to reduced intakes of new business, which fell to the greatest extent for almost seven years. There were reports that high stock levels, ongoing Brexit uncertainty, the economic slowdown and rising competition all contributed to the decreases in new orders and production.

More to follow.....

Some City experts are sceptical about quite how much progress was made between the US and China at the G20 summit.

Although Donald Trump talked up his meeting with Xi Jinping as a big success, we still don’t know how Beijing and Washington will resolve their trade conflict. The two sides also haven’t set any public deadlines.

Russ Mould, investment director at stockbrokers AJ Bell, says:

The fact that China and the US are restarting trade talks gives some reassurance to investors and triggers a small rally in stocks around the world. However, there are plenty of other negative factors to consider which explains why equity markets aren’t experiencing massive surges.

“The trade war is far from over, which means a continuation of uncertainties hanging over the market.

Andrew Milligan, head of global strategy at Aberdeen Standard Investments, is also cautious about the G20 summit, saying:

“In the big picture, it doesn’t change anything. It was never likely to solve the whole problem, but it’s a useful stepping stone.”

Ditto Chris Bailey, analyst at investment bank Raymond James:

“So the can was kicked down the road... but [there is] much more work to do on the details of a future stickable agreement,”

Newsflash: Europe’s factory sector continued to contract last month, taking the shine off today’s market rally.

Data firm Markir reports that its Eurozone manufacturing PMI report, which tracks thousands of firms, fell to a three-month low of 47.6 in June, from 47.7 in May.

That shows that the sector kept shrinking, at a slightly faster rate. It’s the fifth month in a row in which the manufacturing PMI has failed to hit the 50-point mark (which split expansion from contraction).

Companies reported that output and new orders continued to shrink last month - a sign of weak economic demand. That could be partly due to the US-China trade tensions.

Markit reports that Germany suffered the worst slowdown while France’s economy picked up:

Boom! Britain’s FTSE 100 index has hit its highest level in over two months, at the start of trading in London.

The index of top blue-chip shares has gained 75 points, or over 1%, to 7,500 points -- its highest level since 24th April.

Almost every stock on the index is higher, with financial stocks, technology firms, industrial groups, energy providers and miners leading the way.

Traders are racing to buy shares, relieved that America and China have agreed to resume trade negotiations over the weekend.

The trade truce can’t come soon enough for China’s factories, who have suffered falling orders and output in June.

Manufacturing production across China slumped into contraction last month, according to the latest survey of purchasing managers across country.

The Caixin China General Manufacturing PMI fell from 50.2 in May to 49.4 in June, below the 50-point mark that separates expansion from contraction.

It’s the second lowest reading since June 2016.

Firms reported that:

• Output and new work intakes decline for first time since January
• There was a renewed reduction in export sales
• Goods producers cutback input purchasing and payroll numbers

Caixin says Jone was a “challenging month for Chinese manufacturers”, with trade tensions driving down sales, export orders, and production levels.

Companies responded by reducing headcounts further and making fewer purchases of raw materials and semi-finished items. At the same time, selling prices were raised following another increase in input costs, though rates of inflation were negligible.

Business sentiment was broadly neutral at the end of the second quarter, with firms mainly concerned about the US-China trade dispute.

Japan’s Nikkei index has closed at a two-month high, driven by optimism over the US-China trade truce.

President Trump’s decision to ease restrictions on Huawei has boosted tech stocks, amid a general burst of optimism.

Here’s some latest prices:

• Japan’s Nikkei: up 454 points or 2.1% at 21,729.97 points
• China’s CSI 300: up 108 points or 2.8% at 3,933 points
• Australia’s S&P/ASX 200: up 29 points or 0.44% at 6,684 points

Stephen Innes of Vanguard Markets says:

After spending the better part of two months in trade war purgatory and with G20 done and dusted, risk markets have responded to Saturday’s events in a reveller tone.

Indeed, investors heaved a massive, but exhausted, sigh of relief that both the U.S. and China opted to push the reset button and restart trade negotiations amidst other pleasantries – now we’ll have to see, whether it all sticks.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Relief is sweeping the financial world this morning after the US and China agreed to restart trade talks, calming fears of a full-blown trade war.

Investors are welcoming the news that Trump and Xi’s meeting at the G20 in Osaka, Japan, appeared to go well. Share prices are romping higher, on hopes that further conflict can be avoided.

The two leaders gave the green light to fresh trade negotiations, with America pledging not to put any more tariffs on Chinese goods in the meantime. In return, apparently, Beijing will buy more US agricultural goods.

Trump declared that the relationship with China was “right back on track” after an “excellent” meeting.

He told reporters:

“We will continue to negotiate, and I promise that at least for the time being we won’t be adding additional [tariffs].

We’re going to work with China to see if we can make a deal. China will consult with us and will be buying a tremendous amount of food and agricultural products, and they’re going to start doing that almost immediately.”

Trump has also relaxed some of the measures recently imposed on Huawei, by allowing US companies to sell some technology to the Chinese telecoms firm. This move has angered some hawkish US politicians, who believe Huawei is a security threat.

The truce is sparking a risk-on fever in the markets this morning, driving up asset prices. Asian stock markets are higher, with Japan’s Nikkei up over 2% and China’s CSI 300 gaining 2.5%.

European stock markets are tipped to rally when trading being -- the FTSE 100 is expected to gain 58 points, or 0.9%, while Germany’s DAX could gain almost 1.5%.

But.... traders should remember that we don’t yet have a comprehensive trade deal between the US and China.

Adam Cole of Royal Bank of Canada explains:

The compromise reached between Trump and Xi at the week’s G20 meeting went further than most had expected, with Trump putting the next tranche of tariffs on hold and reopening US companies’ ability to supply Huawei.

It is not clear, however, whether the latter will clear congress and there is plenty of scope for trade talks to break down again in the future. For now, however, risk is well supported.

Also coming up today

Data firm Markit is publishing its latest Purchasing Manager Index reports, showing how the world’s manufacturers performed in June.

Economists predict that Britain’s factory sector shrank slightly, as the Brexit stockpiling rush earlier this year continues to fade. Europe’s manufacturing base probably suffered a sharper decline, while America’s industrial sector may have stalled again.

Some top central bankers are gathered in Helsinki for a conference organised by the Bank of Finland, including Federal Reserve policymaker Richard Clarida and China’s top central banker Yi Gang.

The agenda

• 8am BST: People’s Bank Of China chief Yi Gang speaks
• 9am BST: Eurozone manufacturing PMI for June (expected to remain at 47.8 - where 50 = stagnation)
• 9.30am BST: UK manufacturing PMI for June (expected to rise to 49.5, from 49.4)
• 2.45pm BST: US manufacturing for June (expected to remain at 50.1)