International commerce was high on the agenda this week, in the form of tussles about trade agreements. In the US, the tariffs on steel and aluminium imports that President Trump announced last week were challenged by Canada and Mexico, the other members of the North American Free Trade Agreement.
Major US corporations also put pressure on the US president to reconsider. On Wednesday, Gary Cohn resigned from his position as Trump’s economic adviser. Trump did grant Canada and Mexico a conditional exemption on Thursday, but his tariff proposals faced further opposition from Republican politicians, including Paul Ryan, the Speaker of the House of Representatives.
Despite all the wrangling, the S&P 500 was comfortably up by Thursday’s close, mounting a solid recovery from the price fall sparked by the tariff announcements last week.
Stuck in a muddle with EU
Across the pond, meanwhile, the UK and the European Union (EU) revealed hugely differing views on trade in financial services. This suggests that Brexit negotiations on the subject will be arduous to say the least. The UK wants to protect its ability to export financial services and products to the countries that will remain in the EU. Philip Hammond, the UK chancellor, said that financial services must be included in a free-trade deal with the EU and that there should be ‘mutual recognition’ of each side’s regulatory standards. Mr Hammond argued that existing third-country provisions would be insufficient, given the scale of the interaction between the two.
The latest twist in the tortuous Brexit tale had little effect on markets, however. The FTSE World Europe (ex UK) was up by 1.8% by Thursday’s close, while the UK’s FTSE 100 gained 1.9%.
Food for thought
Prezzo joined the growing list of UK restaurant chains which have recently announced closures to try to rescue their businesses. Burger-restaurant operator Byron and Jamie Oliver’s group have also reduced their numbers of outlets. Stresses cited for the UK dining industry include increases in wages, rent reviews, and rising prices for imported ingredients. The casual sector of the industry is also suffering from general overcapacity.
Big in Japan
Japan’s economy advanced by more than expected in the final three months of 2017. Fourth-quarter growth was revised upwards to +1.6% (on an annualised basis) from the +0.5% initially reported. There was a flurry of worry earlier in the week when Haruhiko Kuroda, governor of the Bank of Japan, suggested that the central bank would start reducing the support it has provided to the Japanese economy since the financial crisis. His statement was then dialled down, leaving investors to focus on more general worries such as a potential global trade war and the strength of the yen. Nevertheless, the Topix managed to eke out a 0.1% gain by Thursday’s close.
A hostile £7 billion bid for UK engineering firm GKN by Melrose Industries, an investment company, led to calls for the UK government to intervene. There are fears that the bid could be against the public interest on grounds of national security, given GKN’s involvement in defence-related programmes. A number of MPs wrote to the UK business secretary asking him to block the proposed takeover. More generally, concerns surfaced about ‘asset stripping’, in the context of one of the largest UK industrial companies being broken down into its component parts and these being sold off. Others questioned what message any government intervention would send to prospective investors in the UK.
In the UK, we swapped the snow brought by the Beast from the East for heavy rain. This (naturally!) led us to revisit our favourite cat jokes. Given the weather, we thought that this one merited a mention:“What’s worse than it raining cats and dogs?”
Then there’s this, for writers (and readers):“What’s the difference between a cat and a comma?”
“One has the paws before the claws and the other has the clause before the pause”
We haven’t quite got that spring feline yet …