Fears of a trade war between the United States and China intensified on Monday after Barack Obama launched action at the World Trade Organisation to stop Chinese auto industry aid from threatening jobs in the key electoral battleground state of Ohio. With growth and jobs seen as vital in the race for the White House, the administration said it had begun a case at the WTO in Geneva against what the White House said were illegal export subsidies for cars and car parts. The ratcheting up of the trade tension between the world’s biggest and second biggest economies prompted immediate tit-for-tat retaliation from Beijing, which announced its own WTO case against the US. Trade experts said the tougher approach taken by Obama came as little surprise given the high level of unemployment. No president since Roosevelt in the 1930s has won an election with the jobless rate as high as 8.3% and the labour market has proved particularly weak in the so-called rust belt states of the Midwest, The Guardian writes.
David Cameron has demanded a rethink of flagship state pension reforms amid fears they could alienate core Conservative supporters, including the electorally crucial “grey” vote. The Financial Times has learnt the prime minister personally put the brakes on the plan for a flat-rate benefit worth around £140 a week after realising that millions of people would either lose out – or fail to benefit from – the new system. The policy, confirmed in George Osborne’s controversial March Budget, is the latest to be re-examined after ministers underestimated its potential political fallout. Ministers, already smarting from the row over the “granny tax”, recoiled at the prospect of another backlash from pensioners, the newspaper says.
The yield on Spain’s benchmark 10-year bonds were pulled back just below 6% at the close, but their steady rise all day reflected bets by traders that Madrid’s determination to resist a bail-out will cause more volatility. Some argued that optimism that followed the unveiling of the so-called “Draghi Plan” to buy bonds was already wearing off. John Wraith, a fixed-income strategist at Bank of America Merrill Lynch told reporters: “It’s more a case of we are relieved about the bullet we dodged but we don’t necessarily find ourselves in a more stable footing. If you look at the actual sustainability of funding deficits at the sort of levels we are still at, it’s still very difficult to see how these weaker countries can survive long term,” according to The Telegraph.
MPs are to investigate the Bank of England’s claim that its money-printing operations have benefited pensioners. The Treasury Committee called for written evidence in response to the Bank’s paper which said pensioners and older workers have gained the most from quantitative easing (QE), despite claims they have been hardest hit by the policy. If the Committee decides to hold hearings after it has reviewed the evidence, Sir Mervyn King, the Bank’s governor, or other of its key policy-makers could be summoned to defend its actions, The Telegraph writes.
The French finance minister has warned there are “a lot of questions” which need to be resolved on the proposed £30bn merger between BAE Systems and Franco-German aerospace group EADS, raising expectations that political opposition will derail a deal. Pierre Moscovici said the merger would have to be “examined thoroughly” by the French and German governments which each control a 20pc stake in EADS. Speaking in London after the first official discussions between Britain and France about the tie up, Mr Moscovici said: “We are asking a lot of questions concerning strategic interests of such a merger, the industrial effect, the possible synergies, the governance of the entity, the future of our defence industry, and employment.” It is thought that French opposition could prove to be the major stumbling block for a potential deal, plans for which were leaked last week, The Telegraph reports.
Apple’s iPhone 5 has smashed records before hitting the shelves with more than 2m people pre-ordering the coveted smartphone in its first 24 hours, double last year’s figures. The tech giant warned that many initial orders would not be delivered until October as demand had exceeded “the initial supply”. But it added that the majority of orders would still be delivered as planned on Friday morning. The bumper sales of the iPhone 5 contrast sharply with the sluggish state of the US economy, with the manufacturing sector showing signs of falling back into a slump, The Financial Times explains.
