World Markets Live - August 10 - CNBC Live Events

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World Markets Live - August 10

We’ll be updating you throughout the day with essential breaking news, data alerts, earnings reports and all the major market movements.

    The Bank of England is sticking with a decision to make future banknotes using a polymer containing trace amounts of tallow, a form of animal fat.
    News that the banknotes contained tallow caused outrage when it was first reported. The Bank of England reports that in a public consultation, 88 percent of 3,544 people were against the use of animal-derived products. 
    However, the central bank says the only alternative is to use chemicals from palm oil, which raised environmental sustainability issues, and switching to another source is estimated to cost around £16.5 million over the next ten years.
    The Bank fully recognises the concerns raised by members of the public, both prior to and during the consultation, and has not taken this decision lightly.
    The Bank also understands that the decision it has reached may not address the concerns of all parties, but in making this decision, the Bank has considered very carefully the relevant factors and taken into consideration all of its objectives, including its responsibility to maintain confidence in the currency through the issuance of high quality, secure banknotes and achieve value for money for taxpayers.
    French June industrial production fells 1.1 percent on the month, versus growth of 1.9 percent in May. This was worse than expectations.
    Barclays analyst Apolline Menut, says the fall in production was broad based, with the manufacturing, energy and construction sectors all declining.
    These figures bring Q2 17 industrial production overall to 1.2% q/q, consistent with the already released flash Q2 GDP estimate of 0.5% q/q.
    Looking ahead, although PMIs ebbed in July, they remain well above their long-term average, echoing the positive picture painted by the Banque of France and INSEE surveys and pointing to a sustained positive momentum in Q3.
    We look for GDP growth to remain solid, rising by 0.5% q/q in Q3 17 for a fourth consecutive quarter. 
    North Korea  might be talking loudly and aggressively, but war is a "remote possibility", according to analysts at global risk consultancy Verisk Maplecroft.
    Miha Hribernik, senior Asia analyst at Verisk Maplecroft, says the risk of war remain low as the implications of military options have not changed since the last round of sabre-rattling in April.
    While Kim Jong Un may have met his match in the equally strong-minded and straight talking Trump, we believe neither side is seeking to put words into action.
    North Korea continues to build its nuclear and ballistic missile arsenals as a credible deterrent and guarantee of regime survival, but knowing full well that their actual offensive use would spell the end of the Kim dynasty. 
    The Trump administration is similarly constrained by the risk of escalation. Should the US conduct a pre-emptive strike against the North, a massive DPRK military response against Washington’s ally South Korea is a near certainty.
    Hribernik says a first strike poses too great a risk for either side. He says the only likely options to break the current status quo include the U.S. agreeing to talks without insisting on disarmament, the Kim dynasty crumbling, or the regime agrees to disarm to avoid economic collapse.
     North Korean leader Kim Jong Un inspecting a test-fire of a ballistic missile in May
    Financial service firm Prudential reported its latest earnings results today, along with announcement it is merging its two U.K. businesses into one entity.
    Lee Wild, Interactive Investor’s head of equity strategy, says it is Prudential's Asian business which is driving the surge in profits in the last quarter.
    Double-digit profit growth in Asia and a strong performance in the US had half-year operating profit up by 5% at constant exchange rates. Convert all those overseas profits back into a weak sterling, Pru’s reporting currency, and actual profit was up 15% at just under £2.4 billion. 
    Asia's rapidly growing and underinsured middle class is a lucrative market for Pru, and it’s a long-term structural growth story, not some flash in the pan. Nearly 700 million people there will join the middle class over the next five years.
    Wild warns that, while the stock's valuation is not stretched, it looks vulnerable as buying is drying up.
    Selling the U.K. business could change that. It’s something the company has been mulling over in private, and cutting loose the underperforming domestic operations, where Pru no longer writes new annuity business, could stick a rocket under the share price.

    News today that the M&G asset management business will merge with its Prudential UK & Europe life insurance operation adds fuel to the fire that this is preparation for an eventual sale.
    Shares in Pru are lower today.
    Telecom group TalkTalk has been fined £100,000 by the Information Commissioner's office for failing to look after its customers' data.
    The Commissioner's office says an investigation found TalkTalk breached the data protection act by allowing staff to have access to large quantities of data.
    The investigation did not find a direct link between the compromised information and complaints about scam calls. The Commissioner's office says TalkTalk did not have appropriate measures in place to keep personal data secure.
    Shares in the telecom are positive today.
    Ireland's CPI inflation rate was unchanged month to month in July from growth of 0.1 percent in June. The year on year rate is minus 0.2 percent.
    Skoda and Tata motors have ended talks on a strategic partnership. Skoda says it agrees with Tata that synergies cannot be realised as desired.
    Skoda is no longer pursuing an alliance with Tata.
    Forterra reports a second quarter share loss of 18 cents. Revenue was $436.7 million, below the IBES view of $440.7 million.
    The company says quarterly sales were negatively impacted by tropical storm Cindy and excessive rainfall around the country. 
    Social media company Facebook has launched a rival video platform to YouTube called "watch", which will feature original content from its partners.

    Facebook plans to keep 45 percent of the ad revenue generated from the videos. CEO Mark Zuckerberg said the platform is all about finding programmes that bring fans together, but some critics have said that TV has been doing that for decades.
    Paolo Pescatore, VP of multiplay & media at CCS Insight, says this is a significant step underlining Facebook's commitment to video.
    All of its rivals have strengthened their video offerings and are pushing the boundaries further by rolling out new features quite regularly. And with everyone piling into offering video and TV, it is becoming increasingly hard to differentiate. Fundamentally it’s all about the content, creating that next biggest blockbuster.
    Facebook is very well placed. The company has a tonne of data on its users and will now learn more about consumers' habits and this will give it confidence to invest in content areas that will prove the most appealing to customers.
    Shares in Facebook are trading down around half a percent in premarket trade.
    The latest earnings results and news from North Korea is setting the mood for  U.S. stocks today.
    The stock markets closed lower yesterday. Future values predict this fall is likely to continue today with geopolitical risk fears weighing on market sentiment.
    Oil prices are ticking up after the latest U.S. stockpile data from the EIA showed a larger-than-expected drawdown in crude inventories.
    In about 20 minutes, we have the latest monthly oil market report from OPEC, which will tell us about the latest expectations of global oil supply and demand.
    The U.K. total goods and services trade deficit widened by more than £2 billion from May to June, from £2.516 billion to £4.564 billion. That's the biggest deficit since September.
    June goods export volumes fell 4.9 percent month on month, the biggest fall since June 2016, according to ONS data.
    However, Paul Hollingsworth, U.K. economist at capital Economics, says there are encouraging signs on the net trade front.
    Quarterly growth in export volumes (which is what matters for GDP growth) of 1.5% in Q2 was stronger than the 0.4% rise in imports, suggesting that net trade probably made a small positive contribution to GDP growth, after exerting a 0.8 percentage point drag on growth in Q1.
    Looking ahead, surveys suggest that the manufacturing sector should gain some momentum in Q3, while export growth should pick up further. As a result, we remain optimistic that growth should hold up fairly well in the second half of the year, rather than slow.
    Looking ahead, Allie Renison, head of EU and trade policy for the Institute of Directors, says we are unlikely to see a narrowing of the trade deficit anytime soon, as many orders are priced in foreign currencies while sterling's value has plunged.
    Exports to the EU have steadily risen in recent months, an area of our trade we should closely monitor as we move into trade negotiations with Brussels. Once our new trade relationship with the EU is finalised, the U.K. can focus more easily on advancing new trade agreements with the rest of the world, which is the order our members favour.
    However, the Government should also use the opportunity of a transitional period to work with industry in developing a strategic framework for how best to pursue those opportunities both in the short and longer term.
    The latest OPEC report says oil output rose by 0.5 percent in July to 32.87 million barrels per day (bpd). July's output rise was driven by Saudi Arabia, Libya and Nigeria.
    The oil producers' cartel says global oil demand will rise by 1.28 million bpd next year, up from its previous forecast of 1.26 million bpd. OPEC lowered its forecast for non-OPEC supply growth in 2017.
    Oil prices are holding today's gains after the report's release.
    Primero Mining reports a Q2 loss of $300.4 million, or 2 cents per share. Quarterly revenue was $16.2 million, versus $42.6 million the year before.
    The total production of gold ounces produced was 27 percent lower than the year before.
    Primero also announced it is selling the Black Fox mine and complex for $35 million. It will use the proceeds to reduce its total debt.
    At the midday point, here's how European markets are doing. The Stoxx 600 is down 0.5 percent, led by losses in the basic resources and banking sectors.
    This is how the individual major bourses are looking.
    Britain's FTSE has hit session low, now down 1.2 percent and on track for worst day in 4 months:
    Berenberg's Kallum Pickering analyses the UK housing market:

    Because of badly designed rules for land and house building - which inhibit adequate supply growth – and misguided demand-side support from policy makers, the UK housing market is prone to large cyclical swings. These swings exacerbate the normal ups and downs in the economic cycle. Rising house prices in the 2000s, and risky lending practices, encouraged homeowners to withdraw equity to finance consumption. This extra demand fuelled the debt driven pre-Lehman upswing. When the housing market corrected in 2008, falling property values caused a balance sheet crisis for homeowners, worsening the shock to demand and deepening the recession. While the post-Lehman upswing in the housing market has been far less vigorous than before, the underlying problems have not been fixed. And although it is just a tail risk, yet again, we need to pay close attention to the threat posed by a potential slump in the housing market. 
    When most of the euro zone seems to be flourishing, its third largest economy remains a major headache.

    Italy is dubbed by many analysts as the biggest threat to the stability of the euro zone economy, even though recent data have come in above forecasts.

    Italy's GDP (gross domestic product) year-on-year percentage change is only half of the euro zone average," Marco Wagner, senior economist at Commerzbank in Germany told CNBC in an email. "This shall remain so for the time being, he added.

    Euro zone’s third largest economy is causing headaches for investors — and it might get a lot worse

    CNBCWhen most of the euro zone seems to be flourishing, its third largest economy remains a major headache.
    US Producer Price Index down 0.1% in July, vs 0.1% increase expected
    Gold hit the highest levels in two months on Thursday as the United States and North Korea exchanged more threats, prompting investors to buy bullion as a safe haven asset.

    North Korea on Thursday outlined detailed plans for a missile strike near the Pacific territory of Guam, keeping up a war of words with U.S. President Donald Trump after he said Pyongyang would face "fire and fury" if it continued to threaten the United States.
    U.S. stocks are now open for trading and rising tensions between North Korea and the U.S. is seen to be impacting stocks. Here's what the stocks look like:
    Dow falls 100 points as North Korea tensions linger.
    The Dow has now dipped under the 22,000 level. The U.S. indexes are now lower for the month of August.
    by Spriha Srivastava edited by luke.graham 8/10/2017 1:49:22 PM
    New York Fed President William Dudley says he expects U.S. inflation to increase over the medium term towards the 2 percent goal.
    He expects further labor market strengthening and moderate economic growth. He did raise concerns about racial inequality of employment and income across the U.S. and says the country should better address inequality, though Fed policy is a poor tool for this.
    The U.S. Producer Price Index was down 0.1 percent in July, versus a 0.1 percent increase expected. The core measure excluding food and energy was also down by 0.1 percent. 
    Jim O'Sullivan, chief U.S. economist at High Frequency Economics, says the data were weaker than expected.
    In short, weaker than expected, although the data are volatile and the core measures still show a pick-up in the past year, in contrast to the pattern in the CPI and PCE data.  
    In any event, tomorrow's CPI report will be more important for markets and the Fed.
    O'Sullivan also commented on the jobless claims data, which grew to 244,000 from 241,000 the week before.
    Continuing claims for regular benefits fell 16,000 to 1.951 million. The insured unemployment rate -- continuing claims as a percentage of the insured workforce -- remained at 1.4 percent.
    In short, claims remain low, consistent with the trend in employment growth remaining more than strong enough to keep the unemployment rate trending down.  The 241,000 averaged over the last four weeks is down slightly from 242,000, on average, in Q2, 246,000 in Q1 and 253,000 in Q4.
    The VIX volatility index hit a high of 14.93 in today's session. That is its highest level since June 29, when it traded as high as 15.16.
    Concerns about North Korea is driving up market volatility.
    The picture in Europe is also poor in afternoon trade. 
    The pan-European Stoxx 600 is extending losses and down around 1 percent to its lowest level since the end of March.
    Britain's FTSE 100 is on track for its worst day since April, while the German DAX is down more than 1 percent to its lowest level since the end of April.
    Graham Bishop, Investment Director at Heartwood Investment Management comments on market reaction to rising tensions in North Korea:
    Global equities seem to be a little unnerved over recent days. The market’s fear index, the Vix, which measures implied volatility, has risen from 9 to 13 over the last fortnight. Similarly, safe haven securities, such as gold, have been rallying somewhat. This is understandable given mounting geopolitical tensions between the US and North Korea, which so far is just a war of words. Things could escalate quickly but we wonder whether this is a deliberate distraction from the on-going investigation into Trump’s campaign and Russia. 
    Separately, we note that with the lion’s share of second quarter earnings season done, it is interesting how short- term price action has been muted when stocks have beaten estimates but altogether painful when misses have occurred. US Tech is a case in point. This may suggest much is in the price and therefore risk appetite is taking its own summer holiday.
    ADP CEO: Bill Ackman reminds me of a 'spoiled brat'
    ADP CEO Carlos Rodriguez was speaking Thursday on CNBC's "Squawk on the Street."

    Automatic Data Processing revealed last Friday that Bill Ackman's Pershing Square Capital Management took an 8 percent stake in the company, mostly in derivatives.

    On Monday, Pershing Square nominated its CEO Ackman and two others to serve on the board of the payroll processor.

    Shares of ADP traded 1 percent lower Thursday morning and are down nearly 9 percent for the month.
    Carlos Rodriguez, CEO of ADP.
    Fed's William Dudley says he does not expect inflation to get back to 2 percent in medium term. He added that year-over-year inflation measures will be depressed for a while. That's according to Reuters.
    A little under 30 minutes to the close of European markets and stocks look like this:

    European markets continue lower amid North Korea tensions; Galapagos up 12%

    CNBCEuropean markets continued lower on Thursday as investors reacted to corporate earnings and monitored geopolitical tensions surrounding North Korea.
    European stocks are now closed for trading. The pan-European Stoxx 600 closed lower as investors scoop up safe haven assets and move away from risky assets:
    Major European indexes have gone home in red, looking like this:
    And that's all from us here at World Markets Live. Join us from 0600 tomorrow for more news and analysis. Till then, have a great evening and see you soon.
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