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World stocks hits fresh highs, as bitcoin keeps climbing – as it happened

All the day’s economic and financial news, as new Chinese trade figures beat expectations

An uncertain day for markets saw the FTSE 100 end lower after hitting a new closing peak on Thursday. A profit warning from GKN did not help, but the index was supported by a rise in mining shares following a surge in Chinese imports. On the other hand, sterling managed to maintain its positive mood against the dollar — with the US currency weakened by disappointing inflation numbers — which in turn undermined the overseas earners in the UK’s leading index. Conversely the more domestic focused FTSE 250 edged higher to another closing peak.

In Europe the picture was mixed, while in the US, Wall Street moved higher despite a little uncertainty over a December interest rate rise following the inflation figures.

Presented without comment:

Life advice via @StockTwits #bitcoin #stocktoberfest pic.twitter.com/AMf02pEJoL

Back with Bitcoin, and a senior economist reckons the cryptocurrency faces a “Mad Max problem.”

Teunis Brosens, senior Eurozone economist at ING Bank says:

A core element of cryptocurrency is the lack of a central authority. Nodes on the network verify transactions which are rewarded with transaction fees and in the case of bitcoins, newly minted bitcoins go with each verified block of transaction. From the verifying nodes’ perspective, these new bitcoins are mined. Hence they are referred to as “miners”.

…One of the central issues of cryptocurrencies is trust. How can the rest of the cryptocurrency network trust the verification work done by miners? I’d like to call this the Mad Max problem. In a Mad Max world, with no law enforcement, your base assumption has to be that nobody can be trusted. How to do transactions take place in such a world without anyone getting robbed?

…The cryptocurrency community is aware of the sheer energy consumption issue. Therefore, it is looking for alternative solutions to the Mad Max problem.

One alternative may be Proof of Stake. Miners are not asked to show they put in work (computing power) in validating but to commit valuable resources beforehand, indicating they have a stake in the proper outcome. For example, miners may have to put an amount of cryptocurrency in escrow which is only released if no fraud is detected, otherwise forfeited.

The US inflation figure was the main focus in the day’s data, says Connor Campbell, financial analyst at Spreadex, and it came in below expectations:

The dollar didn’t get the hawkish data delivery it wished for this Friday – well, not quite anyway – leaving (an admittedly tiny) slither of doubt surrounding the potential December rate hike.

The afternoon’s figures weren’t bad by any means. Retail sales saw a huge bounce from -0.1 to 1.6% month-on-month while consumer confidence hit its highest level since 2004. Yet those readings didn’t really matter to investors, who instead focused on the fact inflation rose from 0.4% to 0.5%, not the 0.6% forecast.

Wow! Consumer confidence makes new cyclical high. Is faster #GDP growth finally around the corner? #taxcuts could give the final push

More US data, and it looks like the country’s consumers are in confident mood (see also the retail sales figures.)

The monthly University of Michigan consumer sentiment index climbed from 95.1 in September to a preliminary reading of 101.1 for October. This is better than the dip to 95 which had been expected, and is the highest level since the start of 2004.

The October gain was broadly shared, occurring among all age and income subgroups and across all partisan viewpoints. The data indicate a robust outlook for consumer spending that extends the current expansion to at least mid 2018, which would mark the 2nd longest expansion since the mid 1800’s.

While the early October surge indicates greater optimism about the future course of the economy, it also reflects an unmistakable sense among consumers that economic prospects are now about as good as could be expected. This “as good as it gets” outlook is supported by a moderation in the expected pace of growth in both personal finances and the overall economy, accompanied by a growing sense that, even with this moderation, it would still mean the continuation of good economic times.

The stronger US retail sales and hopes for positive company results have pushed US markets higher once more.

The Dow Jones Industrial Average is up 28 points or 0.12% while the S&P 500 opened 0.16% higher to reach a new peak while the Nasdaq Composite added 0.3% to a record high.

S&P 500 and Nasdaq hit record highs as Wall Street bets on a strong earnings season https://t.co/3Zm1UQScaI pic.twitter.com/S8kI4DVsaY

Not everyone believes a December US rate rise is a certainty, especially after this latest data. John Dolan, senior dealer at FEXCO Corporate Payments, said:

In the space of just a week, all bets on a December rate rise are off and the US is further than ever from solving its inflationary puzzle.

While a December rate hike had seemed a strong probability after last Friday’s solid wage growth data, the picture now looks much more finely balanced.

And from the Bureau of Labor Statistics on US inflation:

More from the US Commerce Department on the retail sales:

The dollar has weakened following the US data, in particular the inflation figures. But — barring political ructions — the Federal Reserve is still on track for a rate rise in February, says James Knightley, chief international economist at ING Bank:

Inflation pressures are grinding higher and domestic activity is strong, suggesting that the main barrier to a higher Fed funds rate is political rather than economic.

The US CPI report shows inflation pressures are rising, but this is primarily an energy story reflecting higher oil prices and refinery shutdowns relating to Hurricane Harvey. At the headline level it rose 0.5% month on month/2.2% year on year (a tenth of a percentage point below what was expected). Energy prices rose 6.1% month on month, but excluding food and energy inflationary pressures were more muted, rising just 0.1% month on month/1.7% year on year (again a tenth of a percentage point below expectations).

Meanwhile US retail sales have bounced back in September, albeit just shy of expectations:

US retail sales MoM (Sep): 1.6% vs 1.7% expected, prior -0.2%
US core retail sales MoM (Sep): 0.5% vs 0.4% expected, prior -0.1%

Newsflash: inflation across America rose last month, but by less than expected.

Consumer prices increased by 0.5% in September, below the 0.6% which Wall Street expected.

#US CPI core #inflation lower than expected — #Fed still likely to hike in December due to strong labour market $EURUSD #Yellen pic.twitter.com/9pCaFnEIFq

So, is bitcoin a sensible investment at today’s record levels, or should you keep well away?

Cryptocurrency’s many supporters will argue that City institutions are waking up to bitcoin’s potential (such as the ability to transfer money safely, securely, and cheaply worldwide).

“The value of bitcoin has almost doubled in less than a month which is clearly attracting further interest from speculators. There’s evidence of growing institutional activity, too, and if China reopens cryptocurrency exchanges after the Communist Party Congress which starts next week, some believe the price could reach $10,000 by the end of the year.

“However, there could be near-term turbulence around changes to the code the bitcoin network runs on, due to be implemented in mid-November. “It is crucial that retail investors understand the many risks involved in cryptocurrency trading, not least the volatility — bitcoin has lost more than a third of its value on two occasions since June. It is clearly not for the faint-hearted.”

The pace of bitcoin’s rally in recent weeks is quite remarkable.

As this chart from Bloomberg shows, it’s quadrupled in value this year, despite faltering last month when China announced a crackdown on bitcoin exchanges.

Our economics editor, Larry Elliott, has been holding the World Bank to account at their Annual Meeting with the IMF in Washington:

Great question from Guardian to @WorldBank boss Jim Kim on the gap between what the international financial institutions say on inequality and what they do. And a very weak answer from Jim Kim. You are what you do, @WorldBank and @IMFNews. pic.twitter.com/S27LBsj2uO

Bitcoin is having another one of those days.

Having smashed through $5,000 for the first time yesterday, the cryptocurrency soared to $5,846 this morning before dipping back to $5,600 as I type.

‘We are about to see massive disruptions’: IMF chief on digital currency future https://t.co/0fGPkRRuJ9

Jamie Dimon vs. Bitcoin, a play in five acts https://t.co/8sAdJVgADD pic.twitter.com/G1geeNZ4Hr

I can see that a cryptocurrency like bitcoin can be useful in a blockchain context and speeding up interbank transactions.

Cryptocurrencies have soared in popularity since 2008, with more than 1,000 in existence today and an aggregate value greater than the market capitalization of IBM.

But we are highly doubtful whether they will ever become mainstream currencies. The need for companies and individuals to pay tax receipts in government-issued currency, and the potentially unlimited crypto-money supply, pose significant barriers to widespread adoption. We think the sharp rise in crypto-currency valuations in recent months is a speculative bubble.

India’s stock market has been swept to a new alltime high today:

The Nifty has hit 3 fresh records in the last 2 months but it has been one roller-coaster ride! pic.twitter.com/dE3NARJppK

China also hit a milestone for iron ore imports last month, as it bought more higher-quality stocks from abroad.

Bloomberg has the details:

Iron ore imports by China surged above 100 million metric tons to a record, smashing the previous high set in 2015, as the country’s concerted push to clean up the environment stoked demand for higher-grade material from overseas while hurting local mine supply.

Iron Ore Rallies as China’s Imports Smash 100 Million Ton Level https://t.co/8IVQF7oyeP via @jasminengzt pic.twitter.com/pBvolOAhkT

Newsflash: Uber has filed an appeal against the decision to withdraw its licence to operate in London.

Uber has now filed an appeal against TFL’s decision not to renew its licence in London.

“While we have today filed our appeal so that Londoners can continue using our app, we hope to continue having constructive discussions with Transport for London.

“As our new CEO has said, we are determined to make things right.”

Yesterday, Theresa May once again claimed the energy market was broken as she brought forward draft legislation for a price cap.

But the big six suppliers, who have around 80% of the market, lost a record number of customers in September.

Big six energy cos lost a record number of customers in September (163K), says Jefferies. More than 1m people have left big six this year pic.twitter.com/C9GxjBrrIu

The FTSE 100 isn’t sharing in today’s rally.

Stocks in London have dropped back from last night’s record close, as the pound’s recovery weights on exports. The Footsie is now down by 26 points at 7530.

The bulls have the edge, and a strong US and European earnings should stand them into good stead for the rest of the year.

Sterling is rallying this morning, thanks to signals that Britain and the EU might make progress in the Brexit talks.

It has risen over $1.33 against the US dollar for the first time in almost two weeks, and is also recovering against the euro.

$EURGBP moved above 0.90 yesterday on Barnier’s «deadlock» comment but now back below 0.89, as EU/UK may soon discuss transitional deal! pic.twitter.com/LqFHOmRsYn

This isn’t exactly a fresh-take; a transitional period has been batted about since Brexit day dot. And [EU negotiator Michel] Barnier wasn’t actually that much of a doomsayer on Thursday, stating his belief that ‘decisive progress’ was within reach in the next 2 months.

But investors are being selective in what Brexit news they want to listen to, with this Handelsblatt report sending sterling sharply higher.

Marc Ostwald of ADM Investor Services says the Chinese economy seems to be in relatively good health, ahead of next week’s Communist Party Congress.

The September Trade data painted an overall much stronger picture of domestic demand than many had been anticipating, and effectively made clear that the weaker August readings did not signal impending weakness.

That said, some of the boost to imports was probably attributable to some front-loading of imports ahead of last week’s National Day/Autumn Festival holiday, with more working days this September probably also giving a boost.

The oil price has jumped this morning, as the markets react to China’s 18.7% surge in imports.

Brent crude has jumped by 1.5% to $57.07 per barrel, with traders anticipating higher demand for energy.

Best/worst performers —
Commodities today:
Oil — US Crude: 1.2%
Oil — Brent Crude: 1.1%
Spot Gold: 0.2%
Spot Silver: 0.2% pic.twitter.com/KwgdRsvbWJ

Buoyancy among commods, esp iron ore and copper helping, after China trade numbers. Risk is a USD pop this afternoon after US CPI

China’s trade with North Korea slumped in September, according to today’s trade data, in a sign that United Nations sanctions against Pyongyang are being implemented.

Chinese imports from North Korea fell by almost 38%, including imports of iron ore and coal according to customs spokesman Huang Songping. Chinese exports to North Korea also fell, by 6.7%. More details here.

Today’s Chinese trade data might irk Donald Trump. According to Reuters, China’s trade surplus with the US has hit an all-time high.

Reuters reports:

China’s trade surplus with the United States in September rose to $28.08 billion versus $26.23 billion last month, Chinese customs data on Friday showed.

The surplus was the highest ever with the U.S. for any single month, based on Reuters calculations based on official data going back to 2008.

The strong Chinese trade data sent MSCI’s All-Country World Share index up to a new peak, at 494.84 points.

The index, which tracks equities across the globe, has been rising steadily this year:

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

#China Sep exports +8%yoy (from 5.5% in Aug), imports +19%yoy (from 13.5% in Aug)…tells us that domestic demand and global demand is solid pic.twitter.com/7oSE1uoIrS

Huang Songping, spokesman for the Customs department told a press conference on Friday that trade for the first three quarters improved due to a recovery in overall global and domestic economic environment. There has been a return in global demand, he added.

Barring unforeseen events, China’s will post double-digit growth in foreign trade this year, said Huang.

“It seems the global demand is still there to support the demand for Chinese exports.”

This morning’s Chinese trade data was fairly supportive of a fairly robust domestic economy.

#Japan | Nikkei225 finished up 200 points at 21,155 highest closing level since Dec’96. Going to need a lot moar scandals to get back to 40k pic.twitter.com/NybfRIAcwn

Related: FTSE 100 soars to record closing high following Brexit talks deadlock

Today’s @TimesBusiness front page: Brexit pushes FTSE to new high https://t.co/mwegRIMolZ pic.twitter.com/aAYCdPLWHP

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