Premium

European markets tank after Trump's tariff clash with Brazil and Argentina

Brazil
A blast furnace operator monitors the production of pig iron at the Arcelor Brasil SA steel factory in Vitoria, Espirito Santo, Brazil Credit: RICH PRESS/Bloomberg 

    Global stock markets were rattled today as Donald Trump sparked a new front in his trade wars, announcing plans to slap tariffs on steel and aluminium exports from Brazil and Argentina.

    In a tweet, the US president accused the two South American countries of “presiding over a massive devaluation of their currencies”.

    Plans for a tariff that would have affected the two countries were scrapped last year, following talks between officials.

    The announcement shocked stock markets, sending European shares into sharp falls and pushing investors towards assets perceived as being low risk.

    These were some of the day’s biggest stories:

    Market wrap:

    European markets took the brunt of the losses today, with Germany’s DAX and France’s CAC falling 2.1pc and 2.0pc respectively in the worst day’s trading since early October.

    The FTSE 100’s losses were pared by a weakening pound, which continued to soften as polling showed a narrowing lead for Boris Johnson’s Conservatives ahead of next week’s general election vote. The blue-chip index closed down 0.8pc at 7,285.9.

    Mining firms managed to hold gains during the day, following an initial rise prompted by Chinese manufacturing sector data that pointed to the highest levels of activity in factories since January 2017.

    Meanwhile, Jair Bolsonaro, the Brazilian president, a Right-wing populist seen as a Trump ally, said he hoped the president could be convinced to change his mind on restoring tariffs on all steel and aluminium imports from Brazil and Argentina.

    “Their economy is not comparable with ours, it’s many times bigger. I don’t see this as retaliation,” Mr Bolsonaro said in a radio interview with Brazil’s Rádio Itatiaia.

    “I’m going to call him so that he doesn’t penalise us … Our economy basically comes from commodities, it’s what we’ve got. I hope that he understands and that he doesn’t penalise us with this, and I’m almost certain he’ll listen to us,” he said.

    ‘Unfair’ Labour rail fare cuts will hit roads and benefit wealthy, experts warn

    Labour says it will save average commuters more than £1000 a year by cutting rail fares by a third

    Labour will deal a brutal blow to the country’s ailing road network with a £1.5bn plan to slash rail fares, experts have warned – unfairly boosting affluent train commuters at the expense of millions of drivers, Russell Lynch writes.

    The party claims it will save the average rail commuter more than £1,000 a year from next January by cutting fares by a third, to be funded from the Department for Transport’s (DfT’s) existing budget.

    Shadow transport secretary Andy McDonald refused to rule out axing road projects to pay for the giveaway, which was not included in Labour’s manifesto. 

    But statistics suggest the change will benefit only a fraction of travellers who rely on trains – most of them wealthy –while harming the many more who use their cars to get around.

    Read the full article here

    Former Eddie Stobart boss attacks ‘hypocrite’ rescuer

    DBay floated Eddie Stobart in 2017 after it was spun off from Stobart Group three years earlier

    Former Eddie Stobart boss Andrew Tinkler has launched a stinging attack on the troubled trucking company’s biggest investor, calling it a “hypocrite” and blaming it for a strategy that has taken the firm to the brink.

    A rescue deal led by Isle of Man-based DBay Advisors, backed by Eddie Stobart’s board, is due to be put to a shareholder vote on Friday.

    Late last week the company warned it would run out of cash if investors snubbed the DBay approach.

    Mr Tinkler has lodged a rival offer though investment vehicle TVFB and provided further details on Monday. He declined to comment on whether his rescue has the critical support of Eddie Stobart’s four lenders.

    Read Oliver Gill's full article here

    Inmarsat takeover in doubt as bidders refuse to raise £2.6bn offer

    A takeover row erupted after hedge funds said the bid undervalued the FTSE 250 company

    The £2.6bn takeover of Inmarsat is under threat after the consortium looking to take the satellite operator private rejected calls from hedge funds to offer more cash, my colleague Vinjeru Mkandawire writes. She adds:

    "Private equity giants Apax Partners and Warburg Pincus, together with Canada Pension Plan and Ontario Teachers’ Pension Plan, confirmed that they would not renegotiate the terms of their $3.4bn offer for Inmarsat.

    "The offer is “final and will not be increased”, the consortium said on Monday. 

    "Their decision comes ahead of a court hearing on Tuesday to sanction the deal that had previously been scheduled for Nov 12." 

    Read more: Inmarsat takeover in doubt as bidders refuse to raise £2.6bn offer

    Market close

    The FTSE 100 closed 0.82pc lower at 7,285.94 while the domestically-focused FTSE 250 tumbled 0.54pc to 20,700.21.

    Germany and France both suffered heavy losses today, with the DAX and CAC both tumbling more than 2pc.

    Across the pond Wall Street is heading for its biggest fall since October.

    Commentary on manufacturing data

    Hugh Gimber of J.P. Morgan Asset Management says:

    “Investors had been growing increasingly confident over the past few weeks that the worst of the manufacturing slowdown could be behind us, which has helped to drive equity markets to new highs. Yet today’s decline in the US ISM manufacturing print is materially below expectations and stands at odds with the recent improvement in the US PMI data. A weak employment component is of particular concern given the importance of the US labour market to the health of the overall US economy.

    “Looking ahead to next year, we expect global growth to remain constrained by lingering geopolitical uncertainty, although central bank policy will likely still be working to limit the downside for risk assets.”

    Quick update: Pound and Crude oil

    The pound is down slightly against the dollar at the moment, 0.04pc lower at $1.2934, while it is 0.63pc down against the euro at $1.2934.

    Brent crude oil is having a week start to the week however - having seen big declines last week. It is up 0.87pc at $61.24 per barrel.

    Disabled employment hits record high as bosses open their minds

    Attitudes towards disabled workers have changed radically in the past six years

    The number of disabled Britons in work has soared by 1.3 million since 2013 as record low unemployment has encouraged bosses to think more broadly about who they hire.

    Most disabled people are now in work, with more than four million in employment.

    By contrast the number of non-disabled people with a job has risen by just under one million over the same period, according to the Office for National Statistics.

    This has halved the unemployment rate for both groups, falling to 6.7pc among the disabled and to 3.7pc for those without a disability.

    Ben Willmott at the Chartered Institute of Personnel and Development said: “The tightening labour market has increased competition for talent and encouraged employers to think about how they can become more inclusive.”

    Markets update

    After an initially positive start, helped by better than expected PMI numbers, European markets are set to close firmly in the red in 20 minutes time after Trump casually restored tariffs on Brazil and Argentina. Stocks on Wall Street are also following Europe's lead.

    President Trump also reiterated previous criticisms of the US Federal Reserve that they should continue cutting rates in order to counter the sharp falls being seen in both the Brazilian and Argentinian currencies, as he accused both countries of devaluing their currencies.

    "He seems to have missed the point that the reason the currencies of both Brazil and Argentina are weak is not down to any deliberate or cunning plan on the part of either government, but merely because both their respective economies are in big trouble due to bad governance, says Michael Hewson of CMC Markets.

    "Unfortunately, little details like that, don’t appear to register with this particular President, which as an exercise in economic illiteracy, is hard to beat."

    Good afternoon: Trump will raise levies if there's no China deal

    President Donald Trump will increase tariffs on China if Washington and Beijing can’t reach a trade agreement, US commerce secretary Wilbur Ross told Fox Business Network.

    "Well you have a logical deadline Dec. 15,” Mr Ross said, according to the network.

    “If nothing happens between now and then, the president has made quite clear he’ll put the tariffs in – the increased tariffs."

    Handover

    There’s less than an hour left of trading, but that still means plenty time for further pain. My colleague LaToya Harding is going to take over from here, and will steer the blog into the evening. Thanks for following along – the blog will be running as usual tomorrow, but I’ll be back on Wednesday.

    Full report: Ocado’s bond issue divides investors

    My colleague Laura Onita has a full report on Ocado’s new bond sale. She writes:

    This £500m debt issue spooked traders, sending shares down as analysts disagreed over whether Ocado would have been better off relying on cash from shareholders instead.

    Bruno Monteyne, of Bernstein, said: “As a shareholder you would not want that investment program to be funded by equity.

    "You would want such rent-generating assets [warehouses] to be funded by debt and that is exactly what Ocado is doing today.” 

    However, Clive Black of broker Shore Capital warned: “What surprises us is the need by Ocado for the capital... bearing in mind that it is not so long since it undertook a major equity fund raise.”

    Heavy losses across Europe

    It’s only getting worse in Europe: heavy losses are being sustained across the continent, worsened by that US factory data whiff. Germany’s DAX is particularly woeful, sustaining its worst losses since early October.

    Credit: Bloomberg TV

     Wall Street is also down:

    Credit: Bloomberg TV

    US factories extend contraction

    A worker inspects solar panels at a facility in Hillsboro, Oregon, US Credit: Moriah Ratner/Bloomberg

    Bad economic news from the US: purchasing managers’ index for America’s manufacturing sector gave a reading of 48.1, down from 48.3 in October – one of the lowest readings since the recovery from the financial crash a decade ago.

    Analysts polled by Bloomberg had been expecting a reading of 49.2.

    That indicates a continued and accelerating slowdown (a reading above 50 indicates growth), amid cutbacks, low global demand and continuing trade tensions between the US and China.

    It belies more positive recent readings for Germany and China. The Institute of Supply Management, which gathered the data, found that factory employment continued to drop over the period surveyed, hitting its lowest level since January 2016. Production, meanwhile, dropped for a fourth month.

    European losses cut deep

    At the end of last week, optimism about a potential resolution to the trade war gave way to pessimism, and stock markets reacted in kind: we saw some fairly deep losses despite few material changes beyond the war of words sparked between Beijing and Washington by Donald Trump’s endorsement of the Hong Kong bill.

    Today, there is something material to trade on, and investors are responding as negatively as might be feared. Losses on Germany’s DAX are particularly sharp given its relative recent stability.

    Credit: Bloomberg TV

     

    Metro Bank’s biggest backer sells down stake after bruising year

    Billionaire Steve Cohen is Metro's biggest shareholder with a 7.65pc stake

    A hedge fund tycoon who is the biggest backer of Metro Bank has sold down a chunk of his stake in the troubled lender after a bruising year, Banking Editor Lucy Burton reports.

    Billionaire Steve Cohen has offloaded 3.8m Metro shares for about £7m, according to regulatory filings published days after it emerged that Colombian billionaire Jaime Gilinski Bacal had snapped up a big stake in the bank worth almost £15m.

    
The shares sold by Mr Cohen – an investor whose company was once accused of insider trading – were worth an estimated £152.7m when the bank’s shares peaked last March. 


    The American is one of Vernon Hill’s longstanding supporters, backing Metro when he founded it in 2010 as the first new British high street bank for more than a century. Mr Cohen remains Metro’s biggest shareholder with a 7.65pc stake. 


    Argentine production minister: Tariff announcement ‘unexpected’

    Brazil is likely to be the bigger victim of Donald Trump’s latest tariff plans, but Argentina (which is having enough economic issues already) could do without the hit. Argentine production minister Dante Sica said the announcement of tariffs on aluminum and steel exports from the country was “unexpected” and he was seeking talks with US counterparts.

    Bolsonaro: ‘I'm almost certain’ Trump will listen to me

    Brazilian President Jair Bolsonaro has been on the radio, discussing Donald Trump’s new tariffs plans. Reuters has the latest:

    Brazilian President Jair Bolsonaro said on Monday he is almost certain US President Trump will listen to Brazil’s economic concerns, after Trump said earlier he would re-impose tariffs on Brazilian and Argentine steel and aluminum.

    “Their economy is not comparable with ours, it’s many times bigger. I don’t see this as retaliation,” Mr Bolsonaro said in a radio interview with Brazil's Radio Itatiaia.

    “I’m going to call him so that he doesn’t penalize us ... Our economy basically comes from commodities, it’s what we’ve got. I hope that he understands and that he doesn't penalize us with this, and I’m almost certain he’ll listen to us,” he said. 

    National World confirms it has approached newspaper group JPI

    David Montgomery’s National World is the front-runner to buy scores of regional papers including The Scotsman and The Yorkshire Post Credit:  Paul Grover

    David Montgomery’s news consolidation vehicle National World has suspended its shares and confirmed it has approached JPI Media over the potential purchase of a slew of regional paper titles.

    In a statement, it said:

    The company confirms it is contemplating several acquisitions and has approached JPI following speculation that the sale process for the regional titles had not completed. There is no certainty that any transaction will proceed. A further announcement will be made as appropriate in due course.

    JPI owns and operates around 200 local and regional titles, including the Scotsman and Yorkshire Post.

    Sunday Telegraph Business Editor Chris Williams reported over the weekend:

    National World is the frontrunner to buy the assets, which also include the Sheffield Star and the News Letter in Belfast, after Newsquest, Britain’s second-largest local newspaper publisher, dropped out.

    Newsquest, the British arm of the vast American publisher Gannett, had been in the lead to acquire JPI Media and has long been considered the best fit, with little geographic overlap. However, when the takeover of Gannett by rival GateHouse Media was completed less than a fortnight ago, Newsquest appeared to abandon its pursuit. A source said: “As soon as that deal was completed they went cold.”

    Reach, formerly Trinity Mirror, Britain’s biggest owner of regional newspapers, had previously dropped out, believing the price was too high.

    The lack of competition leaves Mr Montgomery in a position to drive a hard bargain. Goldentree and its partners aim to exit the tough regional newspaper market as soon as possible after selling JPI Media’s prized national title, the i, to the publisher of the Daily Mail on Friday for £49.6m.

    Ted Baker deep in the red

    Ted Baker founder Ray Kelvin was ousted earlier this year following misconduct allegations Credit: Neil Hall/Reuters

    Retailer Ted Baker remains firmly at the bottom of the All-Share index currently, off more than 10pc after this morning’s warning over its stock valuation.

    That has brought shares down to about 356p apiece – their lowest level since 2009.

     You can read more of our coverage of the company’s woes here.

    Scottish Salmon Co. board recommends Bakkafrost takeover

    The board of the Scottish Salmon Company has assessed a takeover bid by Faroe Islands-based fishing company Bakkafrost as fair, after the group’s purchase of a 69pc stake forced it to launched a takeover bid.

    Oslo-listed Bakkafriost bought the stake in late September for around £320m, saying it would give the group “a niche farming region with Scottish provenance products priced at a premium to the market”.

    The Scottish Salmon Co. is also listed in Oslo, but is based in Edinburgh.

    Salmon prices have climbed dramatically over the last decade, due to heightened demand spurred by population growth and a desire for healthier food options.

    Fresnillo slips after low guidance

    Fresnillo is among the biggest fallers on the FTSE 100 today Credit: LAYTON THOMPSON

    Silver and gold miner Fresillo is among the bigger fallers on the FTSE 100 today, after it sets its guidance for production at the lower end of previous estimates.

    Chief executive officer said the company’s main target for the coming year would be stabilising production and finding ways to “unlock” more potential from its current assets.

    The miner expects to produce 885,000 ounces of gold and 55m ounces of silver for the full year.

    Goldman Sachs said the shifted outlook confirmed the group needed more time to fix issues with its production pipeline.

    Miners rising on FTSE 100

    It’s still a pretty muted picture on the FTSE 100, but the biggest blue-chip risers are among the mining and materials firms, and energy giants Shell and BP.

    All the firms stand to benefit from improved conditions in China, but worries after a newly tariff-happy Donald Trump may shake confidence a little.

    Bolsonaro: I have ‘open channel’ with Trump

    Jair Bolsonaro during the changing of the guard at Brazil’s presidential palace Credit:  Joédson Alves/EPA-EFE/REX

    Responding to Donald Trump’s tariff announcement (see 11:16am update), Brazilian President Jair Bolsonaro has asked journalists to wait for him to discuss the matter with his economics minister before he comments.

    He said he has an “open channel” with Donald Trump if needed.

    Meanwhile, Mr Trump has tweeted again:

    The President’s claim that tariffs have shifted the stock markets is of course, highly dubious (it is doubtful whether they have contributed at all). Meanwhile, the tariffs themselves actually result in higher prices for US buyers.

    Markets in reverse

    After a strong opening out of the gate today, a reminder of how Donald Trump operates combined with some mixed PMI data has knocked European shares back a little. The FTSE 100 is clinging onto gains, with a slightly weaker pound no doubt helping. 

    Credit: Bloomberg TV

    Competition watchdog to probe Google’s $2.6bn Looker takeover

    Britain’s competition watchdog will probe Google’s $2.6bn acquisition of cloud computing service Looker amid concerns that it will harm UK companies fighting for a share of the industry, Hasan Chowdhury reports.

    The deal, which was announced in June, will be scrutinised by the Competition and Markets Authority in a sign of the increasingly tough stance being taken against Silicon Valley’s tech firms.

    Looker, founded in 2012 in California, specialises in data analytics and helps businesses process the vast amounts of data they generate to draw insights faster. 

    Last month, the company launched a new version of its product which allows the integration of tools such as Slack, the cloud-place messaging service. 

    Trump to restore tariffs on steel and aluminium from Brazil and Argentina

    In this file photo, a worker checks wire rod rolls at the Belgo Juiz de Fora production plant, in Brazil Credit: P F GROSJEAN/AP

    US President Donald Trump has announced he will restore US tariffs on steel and aluminiumfrom Brazil and Argentina, accusing the South American countries of intentionally devaluing their currencies in order to undercut US farmers.

    He also called for the US Federal Reserve to cut rates and loosen policy to weaken the dollar, in an effort to combat such alleged efforts.

    Brazil and Argentina were both put under a quota system instead of tariffs last year, following negotiations. Further relief was then offered on that arrangement.

    As I noted last week, the Brazilian real recently hit an all-time low against the dollar.

    Just Eat activist says Prosus offer needs £1.5bn boost to be worth looking at

    Just Eat is at the centre of a bidding war Credit: Fergus Burnett

    Although things are continuing to wind down as we enter the holiday period, one City saga is bubbling on: Just Eat activist Cat Rock has called for investment giant Prosus to substantially up its bid for the delivery firm.

    Cat Rock has been a key player in the saga, which has led to a showdown between company-backed plans to merge with Dutch peer Takeaway.com, and Prosus’s unexpected bid.

    The hedge fund, which owns a 2.6pc stake in Just Eat, issued an open letter to other shareholders. Its managing partner Alex Captain said:

    While we are pleased that Prosus has bid for Just Eat, we are deeply disappointed with both the level of their offer and their approach to the bidding process.

    Instead of offering a fair price for Just Eat, Prosus has made a number of claims about Just Eat and Takeaway.com aimed at convincing shareholders not to support their merger.

    He said Prosus’s 710p-per-share offer (which would value Just Eat at £4.9bn) was “not remotely close to our assessment of fair value”, saying 925p was a more appropriate level. That implies a valuation of around £6.4bn, so is a pretty chunky rise.

    Cat Rock’s open letter concludes:

    Prosus has a strong incentive to convince Just Eat shareholders that Just Eat’s problems are deep, structural, and expensive to fix. As described above, we think these arguments are simply wrong.

    As long-term shareholders at Just Eat, it is clear to us that Just Eat is a high-quality business that has suffered from the absence of stable, experienced leadership over the past two and a half years. We think the Takeaway.com merger solves this problem by combining forces with perhaps the most well-run online food delivery company in the world.

    Money round-up

    Ocado slips as it issues £500m bond to raise cash

    Ocado said it expected growth in the region of 10pc to 11pc for the 13 weeks to the start of December Credit: Jason Alden/Bloomberg 

    Ocado has been keeping itself in the news lately, with updates three (work)days on the trot.

    After a jump on Thursday and a surge on Friday, the grocery/technology group is the biggest faller on the FTSE 100 today after announcing the launch of a new £500m bond to fund its expansion ambitions.

    The bonds, which will carry a coupon of 0.75pc to 1.25pc per year, will be repaid by 2025, the company said. They will be eligible for conversion into shares, which is likely part of why the company’s price has slipped slightly today.

    As part of the announcement, the company also updated on sales figures. It said:

    In the 13 weeks to 1 December 2019, we expect Retail Revenue growth of 10-11pc, with growth in orders including those for Ocado Zoom slightly higher than Retail Revenue growth.

    Ted Baker among 2019’s worst-performing stocks

    The fashion retailer has pared its losses somewhat today, but Ted Baker is still among the worst-performing stocks across the All-Share index (the honour of worst faller is held by Metro Bank). 

    Other big fallers include Amigo, Kier and Sirius Minerals. 

    Full report: Ted Baker calls in the lawyers over stock inflation

    My colleague Simon Foy has a full report on Ted Baker’s stock inflation worries (see 8:23am update). He writes:

    The revelation comes after a torrid year for the retailer after twice warning on profits and announcing the departure of its founder and chief executive Ray Kelvin following allegations of inappropriate behaviour

    The PA’s City Editor Simon Neville tweets:

    Jobs cuts deepest since 2012

    IHS Markit’s findings also that November marked the worst month for jobs cuts in seven years:

    November saw manufacturing employment fall for the eighth straight month, with the pace of job losses the steepest since September 2012. Companies linked further cuts to cost reduction efforts, efficiencies, Brexit uncertainty, redundancies, natural wastage and staff restructuring

    Reaction: Expect ‘a bleak beginning for the industry in 2020’

    A wing stands in a bay on the Airbus SE A350 wing production line at the Airbus SE assembly factory in Broughton, UK Credit: Matthew Lloyd/Bloomberg

    Reacting to those PMI figures, the Chartered Institute of Procurement & Supply’s Duncan Brock said:

    A heavy sense of inevitability hung around the sector in November as it continued to suffer the effects of a lethal cocktail of Brexit uncertainty, slowing global growth and an impending General Election. These combined to stifle any chance of manufacturing crawling out of the contraction zone, where the sector was stuck for a seventh month in a row.

    Supply chain managers cited weakened domestic demand and one of the biggest falls in export orders for seven years as companies unravelled their pre-Brexit stocks and resulting in one of steepest reductions in purchasing since 2013. Inevitably, where new orders fall, jobs are sure to follow and manufacturing employment fell at its fastest pace since September 2012. Firms tried to balance their books by reducing overheads and improving efficiencies quickly, and staff numbers were the casualties.

    With this backdrop of pressures, the sector’s performance is unlikely to change any time soon, which means a bleak beginning for the industry in 2020.

    Final reading: UK manufacturing’s November activity fall less bad than expected

    Just in: The final PMI reading for the UK manufacturing sector in November came in slightly higher than the ‘flash’ reading earlier this month, at a score of 48.9 (where a reading above 50 indicates growth).

    That’s a still a slowdown, but suggests the slump was not as bad as feared.

     IHS Markit said:

    The UK manufacturing downturn continued in November, as businesses responded to the delay to Brexit and a fresh injection of uncertainty from the forthcoming general election. Output, new orders and employment all fell, while destocking activity resumed as firms depleted buffers built-up in advance of the postponed exit date.

    They added:

    The delay to Brexit had a noticeable impact on stock holdings and purchasing activity during November. Finished goods inventories fell at the steepest rate in over two-and-a-half years, while input buying volumes fell to one of the greatest extents since early-2013. These contractions were a marked reversal from the solid increases seen in the lead-up to the October 31st exit date.

    Hiscox shares stumble as investors brace for relegation

     Shares in Hiscox are slipping this morning, as investors bet the company will lose its spot in the FTSE 100 during this week’s reshuffle calculation.

    The insurance company has ended up in the relegation zone after a series of share-price hits chipped its market cap below the threshold for inclusion in the top index. EasyJet will likely take its spot.

    For Hiscox, which entered the blue-chip index twelve months, a fall would cap off a torrid few months, in which costs from claims related to Hurricane Dorian and recent wildfires in California forced it to warn it may not return to profitability for two or three years.

    The group said this was a “conservative” expectation, “which of course it will aim to exceed”. A double rating cut in early November that knocked prompted a 17pc one-day share price fall may have been the final nail in its coffin. 

    Hargreaves Lansdown’s Nicholas Hyett said weather events had “blown a hole” in Hiscox’s bottom line. “The good news is premiums have continued to grow,” he added, “but that’s unlikely to offset the headwind from increased claims in the short term.”

    The quarterly review of the indices will take place based on tomorrow’s closing prices. Any FTSE 100 company that slips to 111th place or below on the all-share index is automatically demoted, while any company outside the blue-chip index that take 90th position or above is automatically added.

    Eurozone factory activity scores best reading in three months, but continued slowdown indicated

    More purchasing managers’ index activity data, this time the final reading for the Eurozone as a whole. The reading is a mix – on the one hand, a score of 46.9 (where above 50 indicates growth) is the best in three months, but the figure also indicates a slowdown in the sector is continuing.

     Data-gatherers IHS Markit said:

    At the market groups level, both the intermediate and investment goods sectors remained inside contraction territory during November, although in each case rates of decline were weaker. Operating conditions for consumer goods producers were unchanged compared to October

    Its chief economist, Chris Williamson, said:

    Although still signalling a steep rate of decline, the manufacturing PMI nonetheless brings some encouraging signals which will fuel speculation that the worst is over for euro area producers, barring any new set-backs (notably in relation to Brexit and trade wars)...

    ...Perhaps most promising is a marked upturn in business sentiment, particularly in Germany, with optimism about production in the year ahead hitting a five-month high in November. Producers’ renewed optimism in part reflects reduced concerns over trade wars.

    Hong Kong retail sales continue to sink

    Demonstrators in Hong Kong earlier today Credit: Anthony Kwan/Getty

    This morning brought fresh poor economic news for Hong Kong, as the financial hub remains wracked by disruption from pro-democracy protesters.

    The latest the figures for Hong Kong’s retail sector show sales volumes staggered down 26.2pc in October, compared to the same time last year.

    The city is already likely on track for a recession, after a sharp drop in output during the last quarter.

    Capco says it will pursue ‘progressive’ dividend policy

    London landlord Capital & Counties says it will pursue a “progressive” dividend policy and convert to real-estate investment trust (REIT) status, after its completed the sale of its interests in Earls Court.

    The sale, for £425m, will provide initial net proceeds of £156m, with a further £211m to be recieved over the next two years.

    In a business update this morning, the company said:

    Capco is now positioned as a prime central London property investment business centred around Covent Garden.

    It added:

    The West End offers greater insulation from the well-documented wider retail challenges however it is not immune with certain retailers taking a more conservative view, as a result of broader political and macro-economic uncertainty and occupational cost pressures. Nevertheless, trading performance on the estate remains encouraging with footfall growth and average tenant sales continuing to trend upwards.

    Coming up: Final UK manufacturing reading

    Quality Street chocolates are assembled at Nestle UK’s factory in Halifax, West Yorkshire Credit: Asadour Guzelian 

    In just under an hour, we’ll get IHS Markit’s finalised reading for the UK’s manufacturing purchasing managers’ index.

    The flash reading released earlier this month gave a score of 48.3, where above 50 indicates growth. Analysts aren’t expecting any change in that reading. Here’s how the latest numbers look:

    Ted Baker shares drop as it probes £25m inventory overstatement

    Ted Baker says the adjustments will have no cash impact Credit: Jack Taylor/Getty 

     Shares in Ted Baker have slipped sharply this morning, after the retailer announced that it had overstated the value of its stock by between £20m and £25m.

    The company, which recently slipped out of the FTSE 250, said it had appointed law firm Freshfields Bruckhaus Deringer to carry  out a review, and would shortly hire accountants to assist with the process.

    Ted Baker said:

    The Board believes that any adjustment to inventory value will have no cash impact and will relate to prior years...Ted Baker is committed to ensuring the independent review is completed in an efficient and transparent manner and will update the market as appropriate. 

    Liberum analysts said the news was “less than ideal”, adding:

    In our view, it is indicative to some degree of the very early stage work that the new and highly-regarded CFO, Rachel Osborne, is undertaking.

    Europe pushes up

    After ending last week in the red, European shares have pulled back up a little today, with moderate gains across the top indices. 

    Credit: Bloomberg TV

     Markets.com’s Neil Wilson said:

    Markets continue to cling to hopes for a trade deal but increasingly this looks unlikely to be agreed, signed and delivered before year end. Markets though won’t particularly mind – they don’t look in the mood to allow a bit of can-kicking to derail the party, albeit we do see pullbacks along the way on headlines. As long as it can-kicking and not a complete breakdown in the talks, then markets should remain on an even keel.

    Here’s how that Chinese manufacturing data looks

     CMC Markets’ Michael Hewson said:

    This good start for Asia is expected to translate into a similarly positive European open this morning.

    Agenda: European markets to start December higher 

    Business activity in China registered its best reading in almost three years Credit:  STR/ AFP

    Good morning. European markets are tipped to open the month in the green following better-than-expected Chinese manufacturing results for November which gave Asian stocks a boost overnight.

    The Caixin manufacturing survey for November came in at 51.8, its best reading since January 2017. 

    Meanwhile, the pound tread water over the weekend to stay above $1.292 despite polls predicting that the gap between the Labour Party and the Conservatives is narrowing as the general election nears. 

    5 things to start your day

    1) High-Speed 2 officials are ploughing ahead with preparations for a £270m station in Birmingham despite the cloud hanging over the future of the rail link. Read why here

    2) There have been few elections where the voice of business has seemed so peripheral. It feels as if the needs and interests of UK companies both large and small have been largely ignored by all of the major political parties. Starting today, we begin an eight part series featuring the voice of business from all of the UK's regions and spanning all of the nation's biggest industries. Today, Lucy Burton tests the temperature in the City of London.

     

    3) The Lib Dems want to take a leaf out of California’s book and legalise cannabis. But can it work in Britain? Tech reporter Laurence Dodds looks at what we can learn from the Americans.

    4) Boris Johnson’s Brexit deal has given a temporary lift to the nation’s manufacturers but the sector is still facing an “uphill battle” next year, industry body Make UK has warned. Here’s why

    5) A fleet of electric scooters and bikes backed by Ford is preparing to take to the streets in a dozen European cities in the latest phase of the car maker’s survival plan for the Uber era.

    What happened overnight

    Financial markets started December with a risk-on mood in Asia following a better-than-expected reading on Chinese manufacturing that added to evidence the global economy is turning a corner.

    Japanese stocks led equity gains across the region, while S&P 500 Index futures edged up. Ten-year Treasury yields climbed to 1.81pc, and their Japanese counterparts ticked up closer toward zero.

    Sentiment could still be kept somewhat in check by the continuing lack of closure on a US-China trade deal. China’s Global Times underscored that its government wants tariffs to be rolled back as part of “phase one.”

    The so-called official China manufacturing purchasing-manager index exceeded all estimates in a Bloomberg survey, and suggested an acceleration in activity in November. A private gauge released Monday also showed an increase.

      Coming up today

      The reporting wind-down heading into the Christmas period continues this week, but there are still a handful of interesting companies reporting. 

      Interim results: Ferroglobe

      Economics: Markit manufacturing PMI final reading (UK, US and eurozone), ISM manufacturing (US), Caixin manufacturing PMI (China)