Wall Street hits record high after US GDP is revised up – business live

Boom! Wall Street has hit a fresh record high in early trading in New York, helped by today’s growth report.

The Dow Jones industrial average has gained 46 points, or 0.16% to 28,112.58 points for the first time ever.

The S&P 500, which includes a much wider range of companies than the Dow, is also at record levels - up 5.55 points at 3,146.07.

This is just the latest in a series of record highs, as the US market has gained around 20% during 2019.

Today’s GDP revisions suggest there’s less danger of a US recession.

But despite growth being revised up, economists and investors are still cautious about the economic picture.

Here’s some snap reaction:

Newsflash: America’s economy grew faster than previously though in the third quarter of this year.

New data show that GDP grew at an annualised rate of 2.1% in July-September -- the equivalent of just over 0.5% during the quarter.

That’s up from the 1.9% annualised rate estimated a month ago -- showing the US economy is a little stronger than expected.

The Commerce Department has revised up its estimate of inventory growth, and private investment in the last quarter. It also believes personal consumption was a little bit stronger than first thought.

Marketwatch has the details:

Business fixed investment was revised to show a 1% drop instead of 1.3%. The change in the value of inventories or unsold goods was raised to $79.8 billion from $69 billion.

Exports rose a bit faster at 0.9% and imports advanced 0.8% instead of 0.4% as initially reported.

Back in the UK, Capital Economics have issued an interesting research note on how next month’s election could move the markets, and affect the economy.

On an economic perspective, they argue that the best outcome for Brexit is a Labour-led government - which would negotiate a softer withdrawal agreement followed by a referendum which Remain could win.

The worst outcome, though, would be a Conservative minority government as this could lead to a no-deal crisis at the end of January 2020, or December 2020.

A Conservative majority - the most likely outcome at pixel time - is “somewhere in between”.

But how about asset prices? They have plenty of predictions, including:

1. A decisive Conservative win could trigger a “relief rally” in sterling, from $1.29 now to around $1.35, and the stock market. However, such a results could be priced in already
   
   
2. A narrow Conservative victory would probably lead to a fall back in gilt yields and a drop in the pound to around $1.20
   
   
3. A Labour win “would play badly in financial markets”, as “anti-business” policies such as raising corporation tax would outweigh is Brexit stance. A Corbyn victory could push the pound down to $1.20, they reckon, and knock 10% off the stock market.

Just in: The firm behind John Deere tractors and combine harvesters has issued a profit warning, and blamed the US-China trade war.

Deere & Co slashed its profit forecast for 2020, warning that farmers are more cautious about investing in new technology.

It blames the tariffs imposed on US farm exports by China, during the tit-for-tat dispute with the US, along with recent poor weather.

CEO John May told shareholders:

“Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment.

Deers now expects its net income in 2020 to reach $2.7bn to $3.1bn. Wall Street had expected $3.4bn.

Shares in Deere have slumped over 4% in pre-market trading.

The UK’s FTSE 100 index is up 10% so far this year, while the EU-wide Stoxx 600 has gained 21.5%.

And a new poll by Reuters shows that many investors expect the rally to run on in 2020, as fears of a global recession ease.

53 out of 102 analysts, brokers and strategists reckon that risks to the market are “to the upside” - meaning shares could do better than generally expected next year.

Back in August, two-thirds of those polled thought risks were tilted to the downside.

Recent signs of progress in the US-China trade talks have fuelled recent optimism, but investors want to see an actual breakthrough at some point!

Shares in smaller UK companies are also pushing higher today.

The FSTE 250 index of medium-sized listed firms has jumped another 79 points, or 0.38%, to 20,944 -- its highest level since August 2018.

British American Tobacco is the top riser in London today, despite a slowdown in its e-cigarettes division.

BAT told shareholders today that it was benefitting from higher prices, and greater market share, in old-school ‘combustible’ cigarettes. This means revenue growth should hit the top end of its expectations - lifting BAT’s shares by 2.5%.

However.. revenues from “new category” such as e-cigarettes and heated tobacco will only reach the lower end of its goal of 30-50% growth.

The boom in vaping is now under pressure, with President Donald Trump now pushing for a minimum age of 21 for the purchase of e-cigarette products.

Mining stocks are rallying this morning, despite the slump in Chinese factory profits.

Trade war optimism seems to be outweighing anxiety over China. And that’s pushed the Stoxx 600 index to a new four-year high.

Stocks are up in Paris, Frankfurt, Milan and Madrid, as well as London. Basic materials producers, consumer firms, banks and tech stocks are all having a good day.

Jasper Lawler of London Capital Group explains how hopes of a Phase One trade deal (and how often have we read that?!) are pushing equities higher.

Enduring optimism the US can reach an interim trade deal with China has helped investors overlook disappointing Chinese economic data. The steepest fall in Chinese industrial profits in eight months suggest China is still feeling the heat from the trade war on top of a more widespread growth slowdown. Inventors can stomach a slowdown in China if they see an endpoint via the phase one trade deal. If the deal doesn’t materialise and the data out of China continues to weaken, then things could go south quickly.

Wednesday’s top early risers are Asia-focused HSBC alongside mining shares, which all stand to benefit from China striking a trade deal with the US. UK domestic companies are marred in election uncertainty – that explains the relative under performance of UK vs European shares this year

Britain’s FTSE 100 has hit a two-month high this morning, as election worries push the pound down.

The blue-chip index has gained 38 points, or 0.5%, to 7441, its highest point since late September.

Major multinationals are among the risers, as they benefit from a small drop in sterling today to $1.284. That makes their overseas earnings a little more valuable in pound terms.

Investors are also clinging to hopes of a trade war breakthrough.

As is his wont, Donald Trump has been talking up the prospects of a trade deal with China.

He told reporters at the White House last night that a breakthrough was imminent... but also implied that Beijing needs to calm the situation in Hong Kong first.

Trump declared:

“We’re in the final throes of a very important deal, I guess you could say one of the most important deals in trade ever. It’s going very well but at the same time we want to see it go well in Hong Kong.”

Trump’s only talking about the Phase One deal, of course. That would probably see China commit to buying more US agricultural products in return for some tariffs being relaxed.

Commodity prices have been hammered by the slide in Chinese factory profits.

Iron ore and steel prices have both fallen today, on fears of falling demand.

Reuters has the details:

Benchmark Dalian iron ore futures prices, for January 2020 delivery, dived as much as 2.6% to 639 yuan ($90.78) per tonne and closed at 642 yuan per tonne.

The most traded construction steel rebar on the Shanghai Futures Exchange, declined 1.2% to 3,596 yuan a tonne.

Hot-rolled coil, used in cars and home appliances, dipped 0.4% to 3,522 yuan per tonne.

Shanghai stainless steel futures, for February 2020 delivery, declined 1.6% to 14,220 yuan per tonne.

Other steelmaking ingredients also fell, with Dalian coking coal sliding 0.8% to 1,231 yuan per tonne and Dalian coke ticking down 0.4% to 1,865 yuan per tonne.

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

As the trade war between Beijing and Washington drags on, Chinese factories are being hit hard -- fuelling concerns that the world’s second-largest economy is losing momentum.

Profits at China’s industrial firms tumbled by almost 10% year-on-year in October, new government data show today. That’s the worst slump in eight months, suggesting the tariffs imposed on Chinese imports by the US are hurting.

This is the third monthly decline in factory profits in a row, and much worse than the 5.3% decline seen in September.

It appears to be the worst decline in a single month in at least eight years! However, there was a 14% slump in January-February (when the Lunar New Year distorts the data). Either way, it’s a bad sign.

So far this year, profits across China’s massive factory sector are down 2.9%, with manufacturing profits slumping by almost 5%. That will worry Beijing, and could force policymakers to consider new stimulus measures.

Zhu Hong, a senior statistician at China’s National Bureau of Statistics said the decline in profits was mainly due to “a bigger decline in the output price of industrial products, slowing growth of production and sales and other factors.”

We already know that China’s growth hit a near-30 year low in the July-September quarter, and this implies that the fourth quarter of 2019 is tough too.

Economist George Magnus says China’s economy is clearly “still struggling”:

Nie Wen, economist at Shanghai-based Hwabao Trust, fears that Chinese industrial firms will keep struggling, saying (via Reuters):

“The big drop in October profits suggests the real economy is still facing plenty of difficulties.

Profit growth is expected to stay negative for a period of time in the future, likely prompting authorities to unveil more growth-boosting measures in a gradual and restrained way.”

Such weak data also puts more pressure on president Xi Jinping to agree a trade deal with America. That, though, would require big concessions on issues such as intellectual property protections and curbing state subsidies of Chinese firms.

The US stock market hit another record high last night, as investors cling to hopes that a deal will be reached soon.

We’ll find out later today if America’s economy is suffering any ill-effects from the trade dispute, when the latest personal income and home sales data is released, along with updated Q3 growth figures.

The agenda

• 1.30pm GMT: Second reading of US third-quarter GDP. Expected to be unchanged, with annualise growth of 1.9%
• 3pm GMT: US personal income and pending home sales for October