Introduction: Scott Bessent accuses China of trying to damage global economy
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Tensions between the US and China continue to swirl, even though fears of a renewed trade war cooled on Monday.
US treasury secretary Scott Bessent has thrown more fuel on the fire overnight, by accusing China of trying to hurt the world’s economy.
Bessent criticised Beijing for imposing new export controls on rare earths last week – a move which riled president Trump – suggesting the move would backfire.
“This is a sign of how weak their economy is, and they want to pull everybody else down with them. Maybe there is some Leninist business model where hurting your customers is a good idea, but they are the largest supplier to the world.
If they want to slow down the global economy, they will be hurt the most.”
Bessent’s comments come as the mood in the markets turns sour again, following a rally on Monday after Trump seemed to calm a situation which he inflamed on Friday by threatening China with 100% tariffs
Stock markets across the Asia-Pacific region are mainly in the red today, with China’s CSI 300 index down 0.6%, Hong Kong’s Hang Seng losing 1.2% and Japan’s Nikkei dropping by 2.1%.
Cryptocurrencies are also weakening, with Bitcoin dropping by 2.7% and ether shedding 5%.
The row threatens to overshadow the annual meetings of the World Bank Group (WBG) and the International Monetary Fund (IMF) which are taking place in Washington DC this week.
The agenda
-
7am BST: ONS labour market
-
8am BST: UK grocery inflation data
-
9am BST: IEA’s monthly oil market report
-
2pm BST: IMF World Economic Outlook press briefing
-
3.15pm BST: IMF’s Global Financial Stability Report
Key events
Goldman Sachs profits jump too
Kalyeena Makortoff
An investment bank rebound has also boosted earnings for Goldman Sachs, where Q3 profits have jumped 37% to $4.1bn (£3bn).
That is up from just under $3bn during the same period in 2024, and was driven by a 42% surge in investment banking fees, thanks to the same jump in mergers and acquisitions and IPOs that boosted earnings at its larger rival JP Morgan (which reported results earlier today – see here for more).
Goldman’s CEO and chairman David Solomon says:
“This quarter’s results reflect the strength of our client franchise and focus on executing our strategic priorities in an improved market environment.”
However, he seemed to hint that the bank would be looking to cut costs, saying it needed to “operate more efficiently” and harness the benefits of AI.
Solomon said:
“We know that conditions can change quickly and so we remain focused on strong risk management. Longer term, we are prioritizing the need to operate more efficiently to seamlessly deliver the firm to our clients helped by new AI technologies.”
UK pension triple-lock set to rise by 4.8% after earnings revision
UK pensioners are on course for a bigger state pension boost next year than previously thought, thanks to a revision in today’s jobs data.
The Office for National Statistics now believes that pay, excluding bonuses, rose by 4.8% per year in the May-July quarter. A month ago it had estimated a rise of 4.7%.
This is significant as this wage data is used in the UK’s pension triple lock, under which payments rise by the highest of inflation, earnings, or 2.5%.
“Those on the full new state pension could be on course for £241.30 per week rather than £241.05 while those on the full basic state pension will see their weekly payment rise to £184.90 rather than £184.75,” explains Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.
JP Morgan points to softening jobs market, as profits jump
Kalyeena Makortoff
JP Morgan profits jumped by nearly 12% in Q3, as the US banking giant benefited from a surge in dealmaking, IPOs and market trading.
A new earnings update show that profits for the three months to the end of September rose to $14.39bn (£10.8bn) up from $12.9bn during the same period last year, following a 16% jump in investment banking fees over the quarter.
Corporate deals and stock market listings experienced a rebound after stalling in the wake of Trump’s tariff announcements in April, thanks in part to hopes of further interest rate cuts by central banks including the Federal Reserve.
The US lender said it also experienced an uptick in trading, which benefited its markets division and pushed revenues to a third quarter record of $9bn.
JP Morgan, which is seen as a bellwether for the US economy, signalled cautiously optimism about the economic outlook.
CEO Jamie Dimon says:
While there have been some signs of a softening, particularly in job growth, the U.S. economy generally remained resilient.
However, there continues to be a heightened degree of uncertainty stemming from complex geopolitical conditions, tariffs and trade uncertainty, elevated asset prices and the risk of sticky inflation.
As always, we hope for the best, but these complex forces reinforce why we prepare the firm for a wide range of scenarios.
The Saxo Strategy Team have summed up the situation in the US-China trade conflict today:
-
While US Treasury Secretary Scott Bessent indicated yesterday that he believes a meeting between President Trump and Chinese leader Xi Jinping might still take place in late October in South Korea, a general standoff remains on key issues and Bessent positioned China’s as the chief instigator of tensions. “This is China versus the world…They have pointed a bazooka at the supply chains and the industrial base of the entire free world. And you know, we’re not going to have it.”
Today, China announced fresh measures against US shipping interests, prohibiting any Chinese individuals or companies doing business with five US entities of Hanwha Ocean tariffs and export controls.
GM to take $1.6bn charge related to EV problems
In the auto industry, General Motors is setting aside $1.6bn to cover the cost of slower-than-hoped take-up of electric cars.
A public filing released this morning shows that GM’s third-quarter results next week will include a $1.6bn impact from its all-electric vehicle plans.
In the filing, GM says:
General Motors Company made significant investments and contractual commitments in the development of electric vehicles (EVs) to help the Company’s vehicle fleet comply with emissions and fuel economy regulations that were scheduled to become increasingly stringent.
Following recent U.S. Government policy changes, including the termination of certain consumer tax incentives for EV purchases and the reduction in the stringency of emissions regulations, we expect the adoption rate of EVs to slow.
$1.2bn of the cost relates to changes to GM’s EV capacity and manufacturing footprint. The remaining $400m relates to contract cancellation fees and commercial settlements associated with EV-related investments.
Rachel Reeves must avoid ‘Scrabble bag’ of tax rises, MPs hear
Rachel Reeves should avoid dipping into a ‘Scrabble bag’ of tax rises as she tries to close a funding shortfall in November’s budget, MPs have heard.
The Treasury committee is taking evidence from top experts about the chancellor’s tax options in the upcoming budget (you can watch the session here).
Dan Neidle, founder of Tax Policy Associates, tells the committee that Reeves has two choices if she decides to raise taxes. The wise way would be to raise one of the UK’s main taxes, or perhaps expand the base of VAT, moves that could break the Labour party’s manifesto pledges.
The less wise way, Neidle adds, is to raise the tax take “from picking from a Scrabble bag of lots of little, individual tax rises”.
This would be suboptimal, Neidle argues, as the UK has seen plenty of minute changes, here and there, to the tax system over the last 30 years.
He says:
Over that time the tax system has become more and more complex, accumulated more and more anomolies and political compromises that become baked in.
Every time you create 10 small tax rises or tax changes, you’re adding to that layer that have ossified our tax system. I very much hope she won’t do that.
Helen Miller, director of the Institute of Fiscal Studies, takes a similar line. She explains that Reeves could raise lots of additional tax revenues without breaking manifesto promises.
“Whatever Rachel Reeves decides to do, there’s a huge opportunity to reform taxes to improve ecoonomic growth.”
Yesterday, the IFS advised the chancellor to avoid “a half-baked dash for revenue” by stitching together unrelated tax-raising measures.
Ruth Curtis, CEO of the Resolution Foundation, says there is a strong case for raising taxes at this budget, pointing out that UK borrrowing costs are higher than other rich countries.
Curtis explains that in a world of low growth and sticky inflation, it is important that tax rises minimise the impact on growth and inflation.
Curtis also argues that the chancellor must thinnk about how the distribution of the pain of tax rises hits as the UK has barely emerged from cost of living crisis,
Dr Arun Advani, professor of economics at Warwick University, point out that if the spending side of budget is fixed, tax rises are the only thing left.
And in a move towards Neidle’s scrabble bag, Advani argues there are plenty of ways of raising taxes that also improve the tax system.
He points to areas where otherwise equal behaviour is treated differently by the tax system.
This creates complexity, scope for tax avoidance, and is very bad for economic efficiency and growth, Advani warns, adding:
Fixing those things would raise money while making the tax system better.
China hits back at US on shipping with Hanwha curbs
Shares in South Korean shipping giant Hanwha Ocean have dropped by 5.75% today after China sanctioned its US units and threatened further retaliatory measures on the industry.
Bloomberg reports:
The sanctions, targeting five US units of Hanwha Ocean Co., fueled a slump in global equities on Tuesday as traders dialed back hopes for an easing of tensions between the world’s largest economies….
In its announcements on Tuesday, China said it was looking into the impact of the US Trade Representative’s Section 301 investigation into the nation’s maritime sector, and may roll out more responses.
Hanwha Ocean’s subsidiaries assisted and supported investigative activities of the US government, thereby endangering China’s sovereignty, security and development interests, according to a commerce ministry statement.
Silver price hit record high in “almighty short squeeze”
Silver has hit a record high today, as US-China trade tensions fuel a dash into safe-haven assets.
Rising expectations of US interest rate cuts, and the on-going ‘debasement trade’, also helped to push silver to a record high of $53.60 per ounce.
Silver is also being pushed up by “an almighty short squeeze, and physical supply crunch,” reports Michael Brown, senior research strategist at Pepperstone.
Concerns about a lack of liquidity in London have sparked a worldwide hunt for silver, with benchmark prices soaring to near-unprecedented levels over New York, Bloomberg report.
European markets dip in risk-off mood
Europe’s stock markets have followed their lead from Asia, and dropped in early trading.
In London, the FTSE 100 share index has dropped by 30 points, or 0.3%, with mining companies leading the fallers.
There are larger losses in other markets, with Germany’s DAX down 1%, and France’s CAC dipping by 0.85%.
Victoria Scholar, head of investment at interactive investor, says:
“Trade tensions between the US and China are escalating as both countries started collecting port fees on shipping firms, pushing up costs on both sides. This has dashed global market sentiment with a sea of red across Europe after yesterday’s market reprieve.
US futures are pointing lower, reversing course after the S&P 500 logged its best day since May and the Nasdaq closed up 2.2%. Cryptocurrencies are selling off with bitcoin down over 3% and ether and solana both nursing losses of over 5% each. Oil is also caught up in the selling with brent down over 1%.”
Mediterranean Shipping Company has denied any involvement in the potential acquisition of a stake in British airline Easyjet (see earlier post) after reports it was considering a move.
A spokesperson told Reuters:
“MSC denies any involvement in this matter.”
The new port fees rolled out by the US and China today show that the trade war has “sailed into its next act”, says Stephen Innes, managing partner at SPI Asset Management, adding:
This time the battlefield isn’t cyberspace or chip fabs—it’s container ports. The U.S. and China have turned the world’s docks into toll booths.
