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10 August 2019 THE WEEKTalking pointsBritish and American stock markets
suffered “their worst day of the year” on
Monday followingadramatic escalation
of the US-China trade war, said James
Dean in The Times. Tensions were
re-ignited when President Trump
threatened China “withanew round
of import tariffs on $300bn of goods”.
When China hit back withasharp
devaluation of the renminbi (or yuan) –
prompting the US to officially designate
it “a currency manipulator”–traders ran
for cover. Asian stocks sank, and Europe
and the US swiftly joined the pile-up. No
wonder, said Ambrose Evans-Pritchard
in The Daily Telegraph. China’s “drastic
devaluation” could turn this trade
dispute intoafull-blown currency war–“almost guaranteeing a
superpower showdown” if it provokes “a ferocious response from
the White House”. As Capital Economics observed: Beijing has
taken the fateful step of “weaponising” its exchange. If the
devaluation unleashes “a wave of deflation across the world”, it
risks “pushing East Asia and much of Europe into recession”.
“Yuan-a-guess how bad it’s gonna get” asked Jon Shazar on
Reuters Dealbreaker. One thing’s certain: “the Chinese are
showing they’re not screwing around”. By allowing the currency
to weaken below the key threshold of seven renminbi to the dollar
(or “cracking seven” as traders put it) they have breached “an
important psychological barrier” for
markets, noted the FT. This is the lowest
the exchange rate has been inadecade.
“Any large sustained devaluation”
would indeed be “destabilising”–let’s
hope China “considers the impact on its
other trading partners, not just the US”.
Trump shouldn’t be let off the hook
either, said The Observer. The president
is “using the threat ofafull-blown
protectionist stand-off” between the
world’s two biggest economies “to
bully” the US Federal Reserve, and its
chairman Jay Powell, into further interest
rate cuts ahead of next year’s presidential
elections: “global tensions” were top of
the Fed’s concerns when it announced a
quarter-point cut last week. The strategy, clearly, is fraught with
risks and “leaves the global economy balanced onaknife-edge”.US stocks recovered partially on Tuesday, but this could be the
calm before the storm, said the FT. Nomura strategist Masanari
Takada has warned investors to brace fora“Lehman-like”
aftershock. We should certainly prepare for another “bout of
volatility” before September when talks begin again. China is
digging in, said Neil Irwin in The New York Times. We don’t
yet know whether this rout will turn out to be “a major turning
point” or justarough day in the market. But whatever happens,
“it’s clear the trade war is no longer confined to trade”.Issue of the week: the escalating trade warWall Street suffered its “worst day of the year”Making money: what the experts think●Summer shorts
Boris Johnson’s pro-Brexit
backer Crispin Odey is
betting big against British
businesses in the run-up
to the 31 October Brexit
deadline, said Caroline
Wheeler and Rosamund
Urwin in The Sunday
Times. The multimillionaire
hedge-fund tycoon, “who
made millions betting
against the pound after the
2016 referendum”, has
reportedly taken out
£299m in “short”
positions on some of Britain’s biggest firms
–including Royal Mail, Metro Bank and
shopping-centre owner Intu–implying
that “he expects their share prices to fall
as the pound continues to tumble”.
●Odey-ous?
In all, Odey has short positions on 16
UK-listed firms, according to IHS Markit
and Short Tracker data, and “has
increased his position on six of them since
Theresa May announced her retirement in
May”. But he’s by no means the biggest
punter. Marshall Wace, the hedge fund
founded by Brexiter Sir Paul Marshall, has
taken negative positions on 47 companies
worth £1.4bn–including easyJet,
outsourcer Kier Group and Severn Trent.
“It’sadisgrace to democracy that Johnson
is happy to take money fromaman who
stands to makeamint if he
forces no deal on us,” said
Labour MP Ian Murray of
Odey. Still, the financier
renowned for spending
£150,000 onaluxury
hen-house named
“Cluckingham Palace”,
is backing some shares to
rise–notably those of the
supermarket chain Tesco.
When it comes to small
mercies, every little helps.●Savings squeeze
Nationwide Building
Society recently freaked out 1.3 million of
its savers by emailing thema“summary”
of their accounts “showing they all had
balances of zero”, said The Mail on
Sunday. That wasaglitch. But banks and
building societies are still routinely ripping
off savers. Indeed,ayear after the Bank of
England raised the official interest rate to
0.75%, more than half of Britain’s
mainstream savings accounts are still
paying out less than that figure, said
Sam Barker in The Sunday Telegraph.
And there’s no respite in sight. On the
contrary, industry players have been
“queuing up to reduce the rates they
offer”–often drastically. Last month,
Nationwide announced it would cut the
rate on its FlexPlus packaged account from
3% to 0%, on the grounds that the cost
had become “unsustainable”.PPI deadline
Millions of people who were mis-sold
payment protection insurance (PPI) still
haven’t claimed their “dues”, says the
FT. And time is running out ahead of
the 29 August deadline. Here, Lindsay
Cook, co-author ofMoney Fight Club,
offers “last-minute tips” for claimants.Get on with itLloyds Bank is getting
190,000 inquiriesaweek –soget your
application in fast in casea“last-minute
deluge” crashes bank systems. Bear in
mind that while 80% of early applicants
got compensation, that has now fallen
back to around 50%.How doIknow ifIqualify?Look out
for tell-tale phrases like “protection
plan”, “payment cover” or “loan care”
on your old statements. “PPI was
highly likely to have been mis-sold if it
was added without being mentioned to
the borrower, or if he or she was self-
employed or retired.”What if I’ve lost my paperwork?Don’t
worry. If you give your name and
address at the time of the sale, lenders
should be able to find your policy
details. If you can’t remember the exact
date, try checking your credit record.What happens if my claim isn’t settled
by the deadline?It won’t affect
compensation (claims usually take eight
weeks to process). And if you’re turned
down, you still have six months to take
your claim to the ombudsman.Beijing’s move to “weaponise” its currency has caused market tumult. Are traders over-reacting?Odey: betting against Britain?