Markets move higher as Japanese growth beats forecasts – business live

President Trump has problems everywhere – from the tensions with North Korea to the death of a woman at a weekend anti-racism rally – and his economic plans could also be in trouble.

That’s the view of S&P Global ratings, which says Trump could struggle to meet economic growth targets. In a new report it says:

After the failure of the Republican plan to “repeal and replace” the Affordable Care Act, S&P Global Ratings believes the prospects for the administration to work with lawmakers to enact its promised pro-growth plans are, in a word, dim, said an article published today, titled “The Departed: Can U.S. Lawmakers Spur GDP Growth When They Return?.”

“We no longer believe the federal government will be able to push through even a small infrastructure-spending package–much less the $1 trillion the White House has suggested,” said U.S. Chief Economist Beth Ann Bovino.

We still expect a small tax cut of $500 billion, rather than true tax reform, to be passed early next year as midterm elections approach. S&P global has argued that permanence is key to making tax reform effective, which would require bipartisan support.

“With U.S. economic growth stuck at around 2% and as the baby boomers retire, the administration’s plans to cut immigration would likely put the U.S. on the path to even slower rates of economic growth,” said Ms. Bovino.

Hard-tariff policies could provoke a messy scenario in which the U.S.’s trade partners could retaliate in some way. But a limited restriction, which we think seems more likely at this point, may be more symbolic than a meaningful hit to aggregate flows. We expect the current expansionary period–now in its ninth year and the third-longest since World War II–to continue into 2018–with little help from Uncle Sam–albeit at a modest pace.

As expected, shares are moving ahead in early trading as some of the volatility of the past week eases.

The FTSE 100 is up 0.25%, with Standard Life up 2% as it completes its merger with Aberdeen.

France’s Cac has climbed 0.4%, Italy’s FTSE MIB is up 0.57% and Germany’s Dax has opened 0.7% better. Konstantinos Anthis at ADS Securities said:

There is strong fundamental backing behind the major equity markets – with the low interest rates policies being the key catalyst – so stock traders will probably find the opportunity to re-establish their long bets at lower prices after the recent pullback.

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

After last week’s market turmoil in the wake of growing tensions and belligerent rhetoric between North Korea and the US, the week looks like starting on a calmer note. As Kathleen Brooks at City Index put it:

The fact that we didn’t see an escalation in the rhetoric from either side over the weekend could be enough to trigger a recovery after last week’s risk selloff, and keep the markets focused on the economic fundamentals.

President Trump of course now has some rather pressing domestic concerns to deal with after a woman was killed at an anti-racism rally over the weekend.

As for the economic fundamentals, there has already been some positive news from Japan in the form of forecast-beating growth figures. The country’s second quarter GDP grew by 1% quarter on quarter or 4% in annualised terms, which was higher than the 2.5% expected. Economist Rob Carnell at ING Bank said:

That makes Japan the fastest growing economy in the G7 this quarter by our reckoning and may re-start the chatter about the Bank of Japan’s eventual QQE [Qualitative Monetary Easing] exit strategy….

This was not one of those flukey one-offs that was caused by a surge in inventories that will be worked down in coming quarters, or one of those random spikes caused by exports and imports growing out of synch.

Although it is usually exactly the wrong thing to respond to volatile Japanese GDP data by revising full year forecasts, arithmetically, it is going to be hard for us to see only the 1.2% for 2017 we currently have pencilled in, and an upgrade now seems extremely likely.

Elsewhere Chinese retail sales and industrial production rose by 10.4% and 6.4% respectively in July, but this was slightly below analyst forecasts.

Even so the Nikkei 225 is up around 0.98% and the Hang Seng is 1.16% better, as investors focussed on the Japanese data. European markets are also forecast to open higher:

It is a thin day for economic data otherwise.

The agenda:

• 10 BST Eurozone Industrial Production figures