China's factory activity hit by tariffs; KKR pulls out of Thames Water rescue talks
Update:
Date:
Title: Introduction: China's May factory activity shrinks as tariffs hit demand
Content: Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Evidence is mounting that Donald Trump's trade war is disrupting manufacturing activity around the globe.
China's manufacturing activity in May shrank at its fastest pace in two and a half years, according to the latest survey data, as firms were hit by a fall in new orders, and weaker export demand.
The Caixin/S&P Global manufacturing purchasing managers' index, released this mornng, fell to 48.3 in May, down from 50.4 in April. Any reading below 50 shows a contraction, and this is the lowest reading since September 2022.
During April, the US and China imposed tit-for-tat tariffs on each others exports, resulting in triple-digit levies, before the two sides reached a deal on 12 May to lower those tariffs to 10% for 90 days.
Today's PMI report indicates the Trump trade war hurt demand.
Dr. Wang Zhe, senior economist at Caixin Insight Group, explains:
'Overall, in May, manufacturing supply and demand declined, dragged by overseas demand. Employment continued to shrink, while prices remained weak. Logistics were delayed moderately, with manufacturing stocks remaining stable. Business optimism recovered slightly from April's low.
'Currently, unfavorable factors affecting China's economic development remain relatively prevalent. Uncertainty in the external trade environment has increased, adding to domestic economic headwinds
'Major macroeconomic indicators showed a marked weakening at the start of the second quarter. The downward pressure on the economy has significantly intensified compared to preceding periods.
Yesterday, a survey of US factories also showed a drop in production last month, with several manufacturers blaming tariffs for pushing up prices and hitting demand.
That helped to push the US dollar close to a three-year low against a basket of other currenciess.
8am BST: OECD begins Ministerial Council Meeting in Paris
8am BST: OECD to release latest global economic outlook
10am BST: Eurozone inflation flash reading for May,
10.15am BST: UK Treasury committee hold hearing with Bank of England policymakers
Update:
Date: 2025-06-03T06:18:31.000Z
Title: KKR pulls out of a deal to inject fresh equity into Thames Water
Content: Newsflash: Thames Water's efforts to avoid nationalisation have taken a blow.
US investment firm KKR has walked away from the chance to take a stake in the troubled water utility, putting its future in fresh doubt.
Thames had selected KKR as a 'preferred partner' at the end of March, as it looked for a partner to take a stake in its business.
But today, Thames told the City that KKR has indicated that it will not be in a position to proceed, and its preferred partner status has now lapsed.
Sir Adrian Montague, Chairman of Thames Water, says:
'Whilst today's news is disappointing, we continue to believe that a sustainable recapitalisation of the Company is in the best interests of all stakeholders and continue to work with our creditors and stakeholders to achieve that goal.
The Company will therefore progress discussions on the senior creditors' plan with Ofwat and other stakeholders. The Board would like to thank the senior creditors for their continuing support.'
Thames, which is struggling under a debt pile of close to £20bn, also says that 'certain senior creditors' have been working on alternative transaction structures to seek to recapitalise the business. It will now 'progress discussions on the senior creditors' plan with Ofwat and other stakeholders,' it says.
Significant announcement from troubled Thames Water. Its preferred equity partner KKR has pulled out of plans to invest billions the company requires to survive. "KKR has indicated that it will not be in a position to proceed". https://t.co/SdT7bfZgpb
If a deal can't be reached, and Thames falls into bankruptcy, then the company could be takenn into a special administration regime by the UK government.
Update:
Date: 2025-06-03T06:17:42.000Z
Title: Introduction: China's May factory activity shrinks as tariffs hit demand
Content: Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Evidence is mounting that Donald Trump's trade war is disrupting manufacturing activity around the globe.
China's manufacturing activity in May shrank at its fastest pace in two and a half years, according to the latest survey data, as firms were hit by a fall in new orders, and weaker export demand.
The Caixin/S&P Global manufacturing purchasing managers' index, released this mornng, fell to 48.3 in May, down from 50.4 in April. Any reading below 50 shows a contraction, and this is the lowest reading since September 2022.
During April, the US and China imposed tit-for-tat tariffs on each others exports, resulting in triple-digit levies, before the two sides reached a deal on 12 May to lower those tariffs to 10% for 90 days.
Today's PMI report indicates the Trump trade war hurt demand.
Dr. Wang Zhe, senior economist at Caixin Insight Group, explains:
'Overall, in May, manufacturing supply and demand declined, dragged by overseas demand. Employment continued to shrink, while prices remained weak. Logistics were delayed moderately, with manufacturing stocks remaining stable. Business optimism recovered slightly from April's low.
'Currently, unfavorable factors affecting China's economic development remain relatively prevalent. Uncertainty in the external trade environment has increased, adding to domestic economic headwinds
'Major macroeconomic indicators showed a marked weakening at the start of the second quarter. The downward pressure on the economy has significantly intensified compared to preceding periods.
Yesterday, a survey of US factories also showed a drop in production last month, with several manufacturers blaming tariffs for pushing up prices and hitting demand.
That helped to push the US dollar close to a three-year low against a basket of other currenciess.
8am BST: OECD begins Ministerial Council Meeting in Paris
8am BST: OECD to release latest global economic outlook
10am BST: Eurozone inflation flash reading for May,
10.15am BST: UK Treasury committee hold hearing with Bank of England policymakers
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