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Markets find their mojo as currency war fears calm: as it happened

China pegs yuan at weakest point since 2008, but stronger than feared
European holdstrong gains
Commodities have weakened slightly as investor fears subside
Ambrose Evans-Pritchard:Trumps trade wars make a no-deal Brexit increasingly dangerous for the EU
5:13PM
Wrap-up: Europe shrugs off the gloom, but warning signs remain
Markets find their mojo as currency war fears calm: as it happened

The B word could be firmly back in traders minds tomorrow

Credit:
Luke MacGregor/Bloomberg
European stocks shrugged off the fear factor today, holding onto solid gains after China emolliated markets nerves by pegging its currency at a strong level than expected.
Major indices rose across the continent, with Frances CAC taking the biggest share of the gains.
The Chinese central banksdaily reference rate will continue to be closely watched in the coming days, for signs that the Asian superpower may flex its macroeconomic muscles to push back against US influence.
A fall in fear ironically presents problems for the UK, where Brexit worries ring louder when all else is silent. Tomorrows GDP figures will be scrutinised for signs Britain has started free-wheeling if it has, advocates on both sides of the Brexit debate are likely to have their answers ready.
Ill be back tomorrow. You can get the latest updates by following Telegraph Business on Twitter. Thanks for following along today!
4:56PM
FTSE closes day 1.21pc up
European markets have held gains at close for a second day as sentiment continued to warm up.
The FTSE 100 roses 1.21pc to 7,285.90, an 87.2 point gain
Frances CAC 40 rose 2.31pc to 5,387.96,
Germanys DAX rose 1.68pc to 11,845.41
Spains IBEX rose 1.41pc 8,869
Italys FTSE MiB rose 1.47pc to 20,841
4:14PM
Look ahead: GDP figures will enter the spotlight tomorrow
Markets find their mojo as currency war fears calm: as it happened

GDP figures might produce a big movement for the pound

Credit:
Chris Ratcliffe/Bloomberg
The latest UK GDP figures will take centre stage tomorrow, amid fears months of anxiety over Brexit compounded by widepreadbusiness fears of a no-deal exit, will lead to a slowdown.
Predictions for the figures, which will come out at 9:30am, are that GDP growth will fall to 0pc quarter-on-quarter (down from 0.5pc), and 1.4pc year-on-year (down from 1.8pc).
The first-quarter boost is widely believed to have been powered by businesses stockpiling in preparation for a no-deal Brexit. That momentum has dissipated over the past few months (and, if the Wall Street Journal is to be believe, people are eating their stockpiles), so the figures will show the true damage done by the UKsBrexit limbo. Markets.coms Neil Wilson says:

Any move below the flatline in Q2 is sure to act as a drag on the pound, whilst there seems limited upside from a positive surprise given the weight of no-deal Brexit risks. In addition to the headline GDP print we will also be watching for the business investment and manufacturing production figures for a guide to sterling.

We already saw some heavy currency twitches earlier, and if nerves send investors rushing to safe havens once again, the dollar might be next on their list further endangering the pound. As Spreadexs Connor Campbell puts it: Sterling could be in for a workout on Friday morning.
Brace for turbulence.
Meanwhile...

...Donald Trump has launchedhis daily attack on the Federal Reserve, this focusing on the strength of the dollar...
As your President, one would think that I would be thrilled with our very strong dollar. I am not! The Feds high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers like Caterpillar, Boeing,..... Donald J. Trump (@realDonaldTrump) August 8, 2019
3:29PM
Round-up: Savills knocked by Brexit and Hong Kong disruption, Co-op Bank comeback continues
Markets find their mojo as currency war fears calm: as it happened

Hong Kong was brought to a standstill by protests earlier this week

Credit:
ISAAC LAWRENCE/AFP
Here are full reports on two of the days top corporate stories:
Brexit and Hong Kong protests knock Savills profits:Profits at Savills dipped in the first half of the year as the property agent was buffetted by uncertainty over Brexit and the political turbulence in Hong Kong.
Co-op Bank losses narrow as recovery continues:City analysts have warned that Co-op Bank still has a long way to go before making a full recovery despite narrowing first-half losses.
3:15PM
Wall Street holds early gains
US indices have been open for about three quarters of an hour now, and are in positive territory across the board though not as high as European peers. Heres how they stand:
Dow Jones Industrial Average:Up 0.59pc
S&P 500:Up 0.76pc
Nasdaq:Up 1pc
2:57PM
Reaction: Could UK bonds turn negative?
Markets find their mojo as currency war fears calm: as it happened

UK government bonds have long been seen as a safe investment

Credit:
Leon Sosra/Getty
Might British bonds join some European peers by turning negative amid the currently global glut? Asset managerMitons David Jane think its a possibility. He says:

We tend to think of the UK government bond market as having a mix of Eurozone and US bond features. The UK shares characteristics with Europe not only because of its proximity, but due to its relatively aging population and consequently its relatively low growth rate. However, like the US economy it has a vibrant consumer sector with a thirst for debt financing.
With the US economy apparently slowing and the Fed having embarked on a rate cutting cycle, pressure is on UK yields from above. The European economy, especially Germany, is also in a weak place and further pressure on Eurozone rates seems inevitable. This provides a drag on UK yields from beneath.
With Brexit uncertainty weighing heavily we also need to consider the outlook for the UK economy. Its not altogether implausible the UK will at some point, in the not too distant future, also be following the zero interest rate strategies seen already in Europe and Japan. UK ten-year government bonds already yield less than half a percent and these could, in a number of circumstances, be heading down to zero.

Markets.coms Neil Wilson adds:

Whilst gilts and other global bonds have today stabilised and yields risen a little off their lows, there is not yet the sense that we are about to see a meaningful or lasting rally as central banks embark on new rounds of rate cuts.
2:39PM
Full report: Burford war of words escalates
Markets find their mojo as currency war fears calm: as it happened

Muddy Waters Research founder Carson Block

Credit:
David Paul Morris
Burford has levelled out those sudden gains slightly, but is still up over 30pc on the day (but down 43pc from its opening price on Tuesday).
The jump began after the litigation funder fired back at short seller Muddy Waters Research, which criticised itin a reportyesterday.
Heres our full report, by Harriet Russell and Michael ODwyer:
Burford Capital hits back at Muddy Waters short attack
2:32PM
Correction: Pound stopped just short of lows
Apologies, looks like I slightly misread my own numbers there. Though it was close, the pound didnt quite reach fresh lows against the dollar during that twitch earlier. I have corrected two earlier posts to reflect this sorry for any confusion caused.
2:21PM
Snap take: Pound plummets again on Brexit twitch
Markets find their mojo as currency war fears calm: as it happened

The pound have been steadily dropping since early May
The pound fell into a sharp towards tilt about 45 minutes ago, sending it close to a a two-year low against the euro and near a fresh 31-month low against the dollar.
Having reversed early gains around midday, sterling fell to $1.2098, near its lowest level since mid-January 2017, and1.0794, its lowest level since late August two years ago. The currency has fallen sharply in recent weeks, accelerating a steady decline since early May.
The drop is likely due to Brexit nerves, as worries over no-deal return to the forefront of investors mind as global markets calm after a tumultuous week.
Hermes economistSilvia DallAngelo said:

Speculations of an early general election have intensified in recent days, with Johnson having ramped up spending since his working majority in Parliament fell to just one on Friday last week following a by-election in Wales.
As we approach the Brexit deadline of October 31st, we will likely be in a state of heightened volatility.
2:09PM
Burford gains touch 40pc as comeback continues
Burford Capitals shares are now up 40pc following the companys robust pushback against short seller Muddy Waters Research. That still only puts them about halfway to regaining the level they stood at before the plunge began on Tuesday.
2:05PM
Pound pulls back after falling within a whisker of 34-month low
Sterling appears to have pulled out of its nosedive, but is still 0.3pc down on the day after getting near a new 31-month low. It was still some way clearly of the lows it hit during October 2016s freak flash crash.
2:03PM
Report: Turkish fund seen an likely bidder for British Steel
Markets find their mojo as currency war fears calm: as it happened

British Steels future is likely to hinge on government support

Credit:
Steve Morgan
The Guardianis reporting that Oyak, a Turkish military pension fund, is seen as the frontrunner to buy struggling steelmaker British Steel.
Whether receiver EY can complete the sale is likely to hinge closely on government support. Heres ourreport from last month:
Deadline for final British Steel offers looms as thousands of jobs hang in the balance
1:55PM
Pound drops sharply against the dollar
The pound is dropping sharply against the dollar, landing close to a fresh 31-month low of$1.2098. It is around 0.4pc down on the day currently.
Markets Hub - US Dollar
1:40PM
In depth: Why BAs tech woes look set to continue
Markets find their mojo as currency war fears calm: as it happened

British Airways have been prone to trouble lately

Credit:
Paul Hackett/Reuters
After another day of mishaps for Britains flag carrier, tech reporter Harry de Quetteville has taken a look at trouble prone BAs technology issues, a big part ofwhy bad things keep happening for the airline.
Heres his report:In-house or outsourced, why BAs creaking IT systems are a laughing stock
And in case you need a reminder of how many times matters have gone awry for the BA computers...
IT outages at British Airways | The litany of BAs IT woes
1:25PM
Pro-Brexit Bank of England contender: It is obvious that the UK and the EU have to have a sensible relationship
Markets find their mojo as currency war fears calm: as it happened

Gerard Lyons founded Economists for Brexit

Credit:
Pier Marco Tacca/Getty Images Europe
TelegraphBusiness columnist Jeremy Warnerhas published his in-depth, exclusive interview with Gerard Lyons, the Brexiter economist who is hotly-tipped to be the Bank of Englands next governor.
Mr Lyons spoke to Jeremy about his views on monetary policy, the Banks role in the UKs economy, Britains post-Brexit future and more.
You can read the interview here:Boris favourite Gerard Lyons on the Bank of England after Brexit: We must close the pessimism gap
Read more | The next Bank of England Governor
1:09PM
Burford shares flip positive
Shares in Burford have rallied sharply following its response, hitting gains of 10pc, having been in the doldrums all day today at around 6pc down. They still have a long way to go to grab back the losses theyve made so far this week, however.
Heres Telegraph Businesss Ben Marlow on yesterdays bear attack:Wall Street vigilante targeting Burford is force to be welcomed
12:57PM
Burford Capital brands short seller report false and misleading
Burford Capital, the litigation financing firm which experienced a massive share price fall yesterday after a short seller report criticised its operations, has fired back against Muddy Waters Research, the hedge fund which is betting against it.
In a statement published a few minutes ago, Burford called the report: false and misleading, accusing Muddy Waters of factual inaccuracies, simple analytical errors and selective use of information.
Burford which saw nearly ?2bn wiped off its market cap across Tuesday and Wednesday says:

In virtually every instance, Burford has already addressed publicly the points raised by the report, often repeatedly for many years, or has shown them here to be simply erroneous. Burford has been consistent and transparent in its discussion of its financial reporting.

The AIM-listedcompany says its CEO and CFO both wish to buy Burford shares (a display of confidence) and that itwill be hosting a conference call for analysts and investors later today.
Our reporters are unpacking what this move means for the clash Ill bring you their full report when its ready.
12:07PM
Oil drop shows market has plenty to fear
The price of oil is up slightly today, with Brent crude currently at 1.3pc gains. It has dropped sharply in recent days, as trade wars fears appeared to outweigh and supply concerns born out of tensions in the Middle East. Oandas Craig Erlam says the fall reveals market anxieties, writing:

Its interesting to see how the different asset classes are reacting right now and oil charts suggest there is plenty to fear in the current environment. As the trade war has deteriorated further, oil prices have plunged, dropping almost 15pc in a week before paring some of those losses over the last 24 hours or so. Oil prices are back around the 2019 lows and for all the wrong reasons and it seems no amount of central bank easing is making traders feel any better about what lies ahead.
12:01PM
Analysis: The names bond but for how long?
Markets find their mojo as currency war fears calm: as it happened

Traders have piled into bonds in recent months

Credit:
John Sibley/Reuters
Can the global bond market sustain the extraordinary rally it has seen in recent months?
Bonds, which lack the pizzazz of equities, have been defying their prosaic reputation throughout the year, as investors increasingly try to find shelter from global headwinds.
That appeal has sent yields sharply down, with negative rates and flat curves fast becominga fact of financial life.
Ouch! German 2s/10s yield spread drop to 27bps, lowest since 2008. pic.twitter.com/jwUOWultSY Holger Zschaepitz (@Schuldensuehner) August 8, 2019
FidelitysAndrea Iannelli says: High grade credit has been the main beneficiary of the search for income sparked by central bank actions, with six months of consistent inflows into the asset class.
The result? There is around $15 trillion of negative-yielding bonds being held worldwide, and yield lows are being broken left, right and centre.
Heres our big read on the topic:Rock-bottom interest rates, 100-year debt and negative yields: why has the bond market gone haywire?
But could things soon change? Bloombergs John Authers suggests the bonds market may be approach an untenable extreme , while SaxoBanks John Hardy says the rally looks remarkably stretched.
Negative yield has always seemed like an obvious consequence of the global savings glut. When savings are in short supply, they have value. When they are plentiful, their value drops. A complaint about low or negative yield is a failure to see supply and demand at work. Brendan Greeley (@bhgreeley) August 8, 2019
Being flavour of the month (or year) has its pressures, and the bonds market might find itself the centre of some increasingly damaging attention if trade tensions break out into full-blown currency conflict as they so nearly did earlier this week. Mr Hardy concludes:

Given the recent spike in bond and equity markets since the July 31 FOMC meeting and the tit-for-tat of Trump tariffs and China allowing USDCNY to poke above 7.00, risk sentiment and the status and sustainability of all of these recent moves is the chief driver here... be careful out there this feels like a very correlated, headline-prone, nervous market.
11:31AM
FTSE remains slow-footed as Europeans grab gains
Stock indices across Europe are all seeing solid (if uninspiring) gains, with the FTSE 100 once again lagging the rest of the regions blue-chips (a small rising in the value of sterling wont be helping the UKs exporters):
STOXX 600: Up 3.67pc to 372
FTSE 100: Up 0.28pc to 7,219
CAC 40: Up 1.4pc to 5,340
DAX: Up 0.97pc to 11,763
11:20AM
Cineworld looks to the stars after profits slide
Markets find their mojo as currency war fears calm: as it happened

Cineworld hopes a new Star Wars film will raise its fortunes
Cineworld is down about 0.5pc currently, with the mid-cap cinema operator pulling back some losses from this morning after it reported adisappointing first half of the year. Yolanthe Fawehinmi reports:

The FTSE 250 cinema chain said a "compelling film slate" for the rest of the year should make up for a "softer" beginning. It noted the list of Christmas blockbusters this year includes Star Wars: The Rise of Skywalker, "one of the most anticipated movies in recent years", as well as sequels to It and Frozen.

You can read her full report here.
10:49AM
Focus: China export growth pinned on unusual items
Markets find their mojo as currency war fears calm: as it happened

A worker plasters a bridge in Maai Mahiu, Kenya one of the projects being underpinned by China

Credit:
Luis Tato/Bloomberg
China defied expectations this morning by revealing it had returned to exports growth despite trade war fears.
Exports in July were up 3.3pc from a year earlier, the quickest rise since March. Analysts surveyed by Bloomberg had expected a 1pc fall, following a 1.3pc drop in June.
Imports fell by 5.6pc, but even that was better than expectations of a 9pc fall, slightly paring up a June fall of 7.3pc.
Iris Pang, an ING economist covering Great China, has taken a closer look at the figures, which she thinks show some unusual patterns. She writes:

Unusual items appeared to be very supportive to exports. China exported more coal (64pcmonth-on-month), which could be due to a surplus in coal mining, as well as more fertiliser (42pcMoM). It even exported more crude oil (56pc MoM), which is very unusual because China's crude exports had fallen 61.8pcYoY year-to-date.

Ms Pang pointed to a potential link with Chinas Belt and Road initiative, the major economic project under which the Asian superpower is funding building work in foreign countries.

It is possible that these exports are going to the Belt and Road economies which, if true, could be the start of a new trend for Chinas exports.

She adds that a weakening yuan may not be enough to offset an incoming US tariffs hike:

We suspect that more exporters will move away from the US market to Europe and the domestic market to avoid the tariffs.
Strange, very strange. China's exports were better than expected in July, even seeing positive growth. We found some unusual export activities. https://t.co/EGFRhltQFE Iris Pang ??? (@Iris_Pang_China) August 8, 2019
Want to understand more about the methods through which Chinas central bank controls the yuans value? Heres a good read from the Wall Street Journal (?):How China, branded a currency manipulator, steers the yuan
10:27AM
Risers and fallers: Standard Life Aberdeen slips again
Markets find their mojo as currency war fears calm: as it happened

Standard Life Aberdeen sponsors the Scottish Open

Credit:
Andrew Redington/Getty Images Europe
Here are the current top risers and fallers on the FTSE 100, which is narrowly up with three-quarters of blue-chip stocks risings:

Up


Hargreaves Lansdown (up 8.2pc):The Investment platform is enjoying a jump after unveiling solid results despite worries over contagion from Neil Woodford.
NMC Health (up 5pc):The Abu Dhabi-based hospital operator has bounced back slightly after two days of losses that appeared to have been prompted by fears it would be the target of a short seller attack.
Rolls-Royce (up 4.1pc): The engineering giant is feeling the glow a day after announcingnarrowed losses and talking up its Brexit preparedness.

Down


Standard Life Aberdeen (down 3.4pc): The asset management group is feeling a bit off after unveiling continued client outflows yesterday.
Coca-Cola HBC (down 3pc):The European arm of the soft drinks giant missed market expectations for profit after a damp start to the summer.
Lloyds Banking Group (down 3.2pc) and BT(down 5.4pc):The lender and telecoms giant are both currently ex-dividend, meaning people who buy shares today will miss out on the next payout to investors. Prices are down as a result, putting Lloyds near a post-Brexit low.
9:58AM
Analyst round-up: Gold grows brighter as market enters summer doldrums
Markets find their mojo as currency war fears calm: as it happened

The price of gold has surged as investors look for safe haven assets

Credit:
The Royal Mint/PA
A week of market chaos has thrown a lot of pieces up in the air, and traders are only just getting a chance to assess how things have landed.
Heres what market analysts and economists have been saying this morning.
Markets.coms Neil Wilson has focused on rising price of gold, which is off slightly today. Gold hit a six-year record value of $1,500 an ounce yesterday, but Mr Wilson sees the road ahead as challenging:

Golds advance looks unstoppable, with prices striking through the big $1500 level as flagged in yesterday mornings strategy note. The cue was a major melt-up in bonds. $1525-50 looks to be a big area to overcome with a tonne of horizontal past support around this region as the market seeks to overcome the April 2013 crash.

AJ Bells Russ Mould expects big twitches in the coming weeks, brought on the bond market bonanza and a summer slump:

We are heading into the summer doldrums when a lack of liquidity in the market can result in increased volatility.

Deutsche Bank analysts have their worries about the stability of gains made over the last day or so as trade war sentiment improved. They write:

As for the improvement in sentiment yesterday, there wasnt a single clear catalyst which makes sense if you look at the steady reversal higher all session...The Huawei issue is likely still a major sticking point alongside the tariff subject.
9:30AM
Aviva looks at Asian business sale as part of turnaround plans
Markets find their mojo as currency war fears calm: as it happened

Avivas new boss Maurice Tulloch is trying to turn the insurer around
Insurer Aviva isexploring options to shed its Asian operations as part of a major turnaround plan led by new boss Maurice Tulloch. Michael ODwyer reports:

Previous reports have suggested that a sale of the Asian unit could fetch between ?2.5bn and ?3.3bn.
Mr Tulloch, who took over in March, is seeking to turn around Aviva after years of stagnation. The shares have slumped more than 30pc since the firms 2015 acquisition of Friends Life, which boosted its share of the pensions market but also added complexity to the company.

You can read his full report here.
9:12AM
Round-up: No-deal food industry fears, UK worker pay rises, trade war could hit Chinese housing market
Markets find their mojo as currency war fears calm: as it happened

Could food-selling rules be switched in the event of a no-deal Brexit

Credit:
william87
Here are some of our top stories from this morning:
Food industry calls for competition laws to be put on hold in the event of no deal: The Food and Drinks Federation has called for the government to temporarily waive some competition laws as preparations for a no-deal Brexit ramp up.
Workers better off as rising pay helps staff share the economys spoils:Workers are in sustained demand, taking home a bigger share of the economys earnings than previously realised and turning out 10pc more hours of work than they were a decade ago, new research has found.
Trade war could trigger Chinese housing slump that spreads around the world:The world economy is vulnerable to a major housing crash that could lead to a credit crunch, analysts have warned, potentially hitting global growth far harder than the trade war or a no-deal Brexit.
8:55AM
Pound climbs as traders focus on anti-Brexit hopes
The pound, which has been sliding in recent weeks as government rhetoric overa no-deal Brexit hardens, is seeing some gains today, up 0.17 against the dollar and 0.26 against the euro.
It recently hit a two-year low against the euro, and a 31-month low against the dollar, with investors worrying about the impact a sharp exit from the EU could have on Britain economy.
Sterling is still well below where it stood at the end of July, having recently hit a record low against a basket of other currencies.
8:43AM
Hargreaves unscathed by sorrows of Woodford
Markets find their mojo as currency war fears calm: as it happened

Neil Woodford has faced a punishing few months

Credit:
Troika / Alamy Stock Photo
Investment platform Hargreaves Lansdown appears to have avoided the worst amid the fallout from Neil Woodfords equity fund suspension, boosting profits and adding clients. My colleague Michael ODwyer reports:

The FTSE 100 fund supermarket now manages almost ?100bn of investor cash after boosting its assets under administration. Hargreaves boss Chris Hill said it was helped by its best ever tax year end as retail investors piled in to use their ISA and SIPP tax allowances before they lapsed.

You can a full report here.
Hargreaves is leading FTSE 100 risers, up 4.7pccurrently
8:29AM
Agenda: Investors take stock as tensions cool
Markets find their mojo as currency war fears calm: as it happened

A Wall Street trade yesterday

Credit:
Richard Drew/AP
A semblance of positive sentiment is once again in the air this morning, with Asian markets rising and European stock upbeat at open.
Nerves could have taken things either way yesterday, but what started out as a hammering for US indicesturned neutralafter Wall Street mounted a dramatic recovery to close flat.
This time yesterday, traders minds were focused on a slew of rate cuts from central banks in New Zealand, Thailand and India. But what some feared could have become a flock of doves stayed as a trio, and fears ofa full-blown currency war appeared to be premature for the moment, at least.
Read more:Currency wars: how does China benefit and can the US strike back?
Meanwhile, poor factory data from Germany wasnt enough to upset a narrow rally in Europe, which one analyst said was feeling a dead cat bounce after a series of successive falls.
China has set its daily reference rate for the yuan, which sank weaker than 7 to the dollar on Monday morning, at 7.0039 per dollar. Its the first time Chinese currency has been pegged to such a weak level since 2008, but is stronger than the 7.0156 predicted by a group of analysts and traders polled by Bloomberg likely to further soothe nerves.

Into the vacuum


Today has the potential to be very quiet: theres little economic news to focus on, so unless big talk comes out of the US or China, we might expect to see another day of steady recovery.
There are plenty of signs to keep an eye on on, however. The global bond market has continued its paroxysm in recent days amid an investorrush for safety,even if that means buying coupons with negative yields.
Read more: Rock-bottom interest rates, 100-year debt and negative yields: why has the bond market gone haywire?
China and the US have both signalled they expect trade talks to resume in September, so August may stretch ahead as a nervous patch, inflected by the occasional Donald Trump Twitter rant. Ill bring you the latest news as it happens.
In the diary today...
Trading statement: AA, Bellway
Economics: RICS house price balance, Jobless claims (US)
See also:
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