Trade and tax spook markets
The business news that matters
Hello everyone and welcome to the latest Off to Lunch…
Financial markets have had a jolt today after China reported its biggest drop in exports since the start of the Covid-19 pandemic and Italy announced it was introducing a windfall tax on banks.
Exports out of China fell by 14.5 per cent year-on-year in July while imports fell 12.4 per cent, according to new data. The drop in exports was the worst since February 2020 and the start of the Covid-19 pandemic. The consensus among economists was that exports would fall by 12.5 per cent and imports would fall by 5 per cent, according to Reuters, so the data was much worse than expected.
The figures will add to concerns about the health of the Chinese economy and the state of the global economy given the country has become a manufacturing hub for the world. We flagged the concerns about weakening global trade in Friday’s Off to Lunch here
Meanwhile, the Italian government has announced that it is going to charge a one-off 40 per cent windfall tax on the net interest margin generated by banks, the difference between the interest they charge on loans versus the interest they pay-out to savers.
Shares in Italian banks have fallen sharply on the news - Intesa Sanpaolo, the largest bank in Italy, is down 9 per cent while Unicredit, the second largest, is down 7 per cent.
However, shares in banks across Europe have also fallen because of concerns that other countries could be encouraged to introduce a windfall tax too. HSBC, Barclays, Lloyds and Natwest are all down 2 per cent in the UK. The UK government has been putting pressure on banks to offer a better rate to savers, with campaign groups such as Positive Money claiming that banks have profited from rising interest rates and the cost-of-living crisis.
The FTSE 100 was down 0.7 per cent in lunchtime trading, with the Cac in France and the Dax in Germany down more than 1 per cent.
Here is some of the reaction on social media to the news from China and Italy:
Podcast…
The new episode of Business Studies is live and features an interview with Claire Hughes Johnson about the lessons she learned from working at Google and Stripe as they went from promising tech upstarts to big businesses. Johnson worked at Google for ten years - running Gmail, its self-driving car business and holding a collection of other roles - before becoming chief operating officer at Stripe. You can listen to the episode on Substack here, Apple here or Spotify here
Other stories that matter…
1. Retail sales in the UK rose 1.5 per cent year-on-year in July according to new data from the British Retail Consortium and KPMG. This figure measures retail sales by value and therefore does not take inflation into account, which stands at 7.9 per cent according to the latest data. The BRC and KPMG data therefore suggests that retailers have suffered a drop in the volume of products they have sold. The rise in the value of sales in July was lower than expected and lower than the 3.9 per cent monthly average over the last year. Wet summer weather was blamed for dampening demand…
2. An increase in the value of Arm, the UK chip designer, has helped Japanese company Softbank report a $1.1 billion (£864 million) boost to the value of its Vision Fund. Reuters story here
3. Two interesting pieces on tech and productivity. Sarah O’Connor writes in the Financial Times that the UK needs to find more people who can put new technology to use to make businesses more productive. Piece here. And the latest Faster, Please! newsletter says an irrational pessimism about new technologies is obscuring their potential benefits. Piece here
4. Bristol has scrapped plans to charge a levy on businesses that offer car parking spaces for staff. Story here. Meanwhile, the number of bus routes in the UK has fallen by 1,500 to less than 9,000 over the last two years, according to research by Labour. Guardian story here
5. The number of new job openings in seaside towns in England is falling as a boom in staycations caused by the Covid-19 crisis comes to an end. Bloomberg analysis here
And finally…
A reminder that the Premier League starts again on Friday and you can join the Off to Lunch mini-league in Fantasy Premier League if you haven’t already by clicking here. For FPL help and a guide to the players to watch check-out Fantasy Gameweek here
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Best
Graham