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Powered by Guardian.co.ukThis article titled “Wall Street joins market selloff as £40bn is wiped off FTSE 100 – live updates” was written by Graeme Wearden, for theguardian.com on Thursday 7th January 2016 14.50 UTC

More reaction:

Updated

Here’s a reminder of how the Chinese circuit breaker kicked into action today, triggering the shortest trading session ever (just 29 minutes!)

Chinese stock market

China suspends stock market breaker rule – reports

Breaking news from China… the stock market regulator has apparently announced that it WILL suspend its stock market breaker rule.

A sensible decision, as the rule has been tested and found wanting this week.

Ouch. The Dow Jones industrial average has shed almost 300 points, or 1.7%.

Every share is in the red:

Wall Street tumbles at the open

Open of Wall Street

Hold onto your tin hats, folks.

The New York opening bell is ringing, and shares are tumbling sharply.

The Dow Jones industrial average has lost 1.25%, and the tech-heavy Nasdaq dropped over 2%.

It will take a few minutes for Wall Street to calm down. But the news that the Chinese stock market was suspended after just 30 minutes earlier today is clearly alarming investors.

Updated

Commodity prices are hitting new five-year lows, thanks to economic growth fears and the stronger dollar.

Palladium is down 5% at $482 per ounce, its lowest level since August 2010. Zinc has hit a six-year low, and copper is also down.

Could Beijing authorities ditch their circuit-breaker rule, following this week’s turmoil?

Something certainly needs to be done.

We saw today that the prospect of an immediate daily suspension if the market drops too much actually triggered a swift selloff (as investors dashed to get out while they can).

The 5% trigger was hit after just 14 minute, followed by the 7% time-out once trading resumed. That’s not a recipe for calm, rational trading.

Updated

Britain’s FTSE 100 is currently down 2.5%, or 152 points — on track to hit a three-week low.

If it falls much further, it would threaten the lows of last August, the last time China triggered a stock market rout:

The Footsie over the last 6 months
The Footsie over the last 6 months Photograph: Thomson Reuters

The US stock market is on track to hit a new three-month low, when trading begins in 40 minutes time:

US stock market futures
US stock market futures Photograph: Bloomberg TV

The China crisis is partly caused by Beijing’s policy of pegging its currency against the US dollar, argues economist Sean Richards.

A deeper analysis of the Chinese situation shows us that its own financial instabilities have been exacerbated by the strong US Dollar.

This has been made worse by its decision to set its exchange-rate against it. Thus rather than drifting lower like virtually everyone else instead the pressure builds up, which it has tried to resist, but even with its sizeable currency reserves it has to give way every now and then. This then adds to the pressure as everybody concentrates on the decline in the reserves rather than the large amount left.

Also I suspect that those in the “know” have been trying to get out of the Yuan before it falls further which only makes things worse.

Got it in one…

China’s international competitors will fear that Beijing is triggering a currency war, by allowing the yuan to hit a five-year low against the US dollar today.

Andy Yu, senior economist at MNI Indicators, says other emerging market currencies will probably also weaken in response (reminder, they’ve already weakened this year).

“A weaker yuan is a concern for emerging markets that compete directly with China in exports. The immediate upshot is that currencies in countries including South Korea, Thailand, the Philippines and Taiwan will continue to adjust downwards in response to yuan moves.

That would push up debt repayments for countries who have borrowed in US dollars. But encouragingly, Yu reckons emerging markets have the firepower to ride out the crisis:

On current evidence the risk of a full blown emerging markets crisis looks less likely with emerging economies having built up larger foreign exchange reserves and put in place far better external debt management. Still the situation bears close scrutiny and alongside continued Fed tightening this year will put pressure on emerging markets’ currencies over 2016.”

Updated

It’s a bad day for stock market bulls…..

A styrofoam bull figure lies on its side in front of DAX board at Frankfurt’s stock exchange<br />A styrofoam bull figure lies on its side on a counter in front of the German share price index DAX board at Frankfurt’s stock exchange in Frankfurt, Germany January 7, 2016. European shares fell sharply on Thursday after China accelerated the depreciation of the yuan, sending currencies across the region reeling and domestic stock markets tumbling. Germany’s DAX dropped 3.6 percent, while Britain’s FTSE 100 weakened by 2.7 percent. REUTERS/Kai Pfaffenbach” width=”1000″ height=”600″ class=”gu-image” /><br />
<figcaption> <span class=A styrofoam bull figure lies on its side in front of DAX board at Frankfurt’s stock exchange today. Photograph: Kai Pfaffenbach/Reuters

The Economist reckons China could trigger a repeat of the 1998 Asian crisis, rather than the 2008 vintage which George Soros fears.

Here’s its logic:

If China devalues, then other Asian nations will come under pressure to follow suit, for fear of losing competitive position. That will trigger worries about those Asian companies that have borrowed in dollars. there could be banking issues in Asia.

This is a potentially worrying scenario. Whether 2008 is the right parallel is another matter. If the bearish case does come true, then it sounds more like 1998 when a round of Asian devaluations was triggered by the realisation that growth had been fuelled by speculation. Western economies did manage to overcome that crisis. The real worry is that emerging countries are a lot more important for the global economy than they were back then.

More here: Is this really 2008 all over again?

Soros: It’s 2008 all over again

Hungarian-born US magnate and philanthropist George Soros attends an economic forum in Colombo on January 7, 2016. Sri Lankas new government is trying to woo investors after a year in office. AFP PHOTO / LAKRUWAN WANNIARACHCHILAKRUWAN WANNIARACHCHI/AFP/Getty Images
George Soros attending an economic forum in Colombo, Sri Lanka, today. Photograph: Lakruwan Wanniarachchi/AFP/Getty Images

Investor-turned-philanthropist George Soros has contributed to the gloom today, by claiming that we could face a repeat of the turmoil we experienced in 2008.

Soros, who famously beat the Bank of England on Black Wednesday, told an audience in Sri Lanka that the current situation reminded him of the financial crisis seven years ago.

He said:

“China has a major adjustment problem. I would say it amounts to a crisis.

When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”

Alarming stuff. However, before you sell everything, it’s worth remembering that Soros has previous form here. In 2011, he declared that the eurozone debt crisis was “more serious” than the 08 crash.

European policymakers managed to avoid a Lehman Brothers-style moment, although obviously Greece’s problems aren’t fixed. So Soros’s words are worth taking seriously…

Updated

Some Chinese companies could be forced into default if Beijing continues to devalue the yuan.

So argues Danae Kyriakopoulou, senior economist at the Centre for Economics and Business Research. She warns:

Many Chinese corporates have taken on a lot of debt, some of it dollar-denominated. This exposure creates an important risk as the People’s Bank of China PBOC continues to allow the yuan to weaken.

It is not far-fetched at this stage to draw comparisons with the Asian currency crises of 1998 that occurred as economies with high levels of dollar-denominated debts were forced to devalue. This, together with the commitment by the Chinese leadership to give market forces a greater say may mean that we will see many more corporate defaults in China this year.

As covered earlier, Beijing has already spent half a trillion dollars propping up the yuan this year. It still has more than $3trn left to help engineer an ‘orderly’ devaluation….

£40bn wiped off FTSE 100 this morning

What. A. Morning.

Nearly four hours after trading began, the FTSE 100 is still deep in the red as the latest crash in China spooks markets around the globe.

The blue-chip index is currently down 2.65% or 160 points at 5912, its lowest level since mid December.

That, by my calculations, wipes more than £40bn off the value of the 100 companies on the Footsie. A blow that will be shared by City traders, pension funds and small investors alike.

Mining companies continue to suffer, on fears that the crisis in China will cause serious harm to the global economy. Anglo American, which produces iron ore, copper, nickel and coal, has slumped to another record low.

Fund manager Aberdeen Asset Management is also being hit hard; it manages tens of billions of assets in emerging markets and in Asia.

The biggest fallers on the FTSE 100 today
The biggest fallers on the FTSE 100 today Photograph: Thomson Reuters

The news that the yuan hit a five-year low today – effectively a devaluation by Beijing – is also worrying investors.

Jasper Lawler, analyst at CMC Markets, says:

UK and European stocks are extending declines in one of the worst opening weeks for the year for stock markets in recent memory. China is at the top of a dizzying list of concerns for markets.

And with oil hitting a fresh 11-year low, and the pound at its weakest since 2010, there’s plenty for investors to fret about.

Connor Campbell of Spreadex sums up the mood:

There have been painfully few chinks of light this morning, the markets covered in an almost impenetrable cloud of bearish fog.

Updated

There are anxious faces on the Frankfurt stock market, as traders watched shares slide.

The DAX index fell by over 3% this morning, dropping through the 10,000 point mark for the first time since October.

A trader works in front of a board displaying the chart of Germany’s share index DAX at the stock exchange in Frankfurt am Main.
Stock exchange in Frankfurt - Dax drops below 10,000<br />07 Jan 2016, Rhineland, Germany — Traders look at their screens on the trading floor at the stock exchange in Frankfurt am Main, Germany, 07 January 2016. China’s ongoing stocks slump is continuing to affect the German stock market. Germany’s DAX stock market index dropped below 10,000 points. Photo: FRANK RUMPENHORST/dpa — Image by © Frank Rumpenhorst/dpa/Corbis” width=”1000″ height=”668″ class=”gu-image” /> </figure>
<p>German exporters such as <strong>BMW</strong>, <strong>Daimler</strong>, <strong>Volkswagen</strong> and <strong>ThyssenKrupp</strong> led the selloff, all falling by around 4%. They are all vulnerable to a sharp slowdown in the Chinese economy.</p>
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Wall Street is expected to join the selloff when trading begins in three and a half-hours.

The futures market suggest the Dow Jones industrial average will tumble by 2.5%, while the Nasdaq is heading for a 3.3% plunge.

The pound appears to be suffering from the uncertainty over Britain’s membership of the EU.

Andy Scott, economist at currency firm HiFX, reckons Brexit risks are compounding the impact of the China crisis on the UK currency.

He explains:

Sterling’s decline against a rising US Dollar has been accelerated by the risk-off mode this week that has investors seeking refuge in safe haven currencies including the US Dollar, Japanese Yen and the Swiss Franc. That can almost entirely be attributed to the Chinese central bank allowing its currency to weaken to its lowest level against the dollar in almost five years, fuelling speculation that the economy is slowing faster than official figures suggest.

“Concerns over a Brexit and reduced bets that the Bank of England will hike rates any time soon have also weighed on Sterling.

“The Bank of England and the Chancellor have been quite vocal about risks facing the UK economy this year and the early signs are that China’s economy is weakening further, putting a bigger question mark over global growth

And that’s why the pound is at a five and a half-year low of $1.456 today, as this chart shows:

Pound vs dollar over the last decade
Pound vs dollar over the last decade Photograph: Thomson Reuters


Veteran analyst David Buik, who has seen a few crashes in his time, says there is an “acrid stench of fear” in the City and Canary Wharf.

He adds:

The start to the year has been metaphorical carnage as far as equities are concerned. China has set the agenda with two gargantuan falls this year, aided and abetted by oil falling to its lowest level in 12 years (-4% today) suggesting that investors are not happy campers!

Updated

Panda bear market, anyone?

We have a glimmer of good news – Europe’s unemployment crisis has eased a little.

The eurozone’s jobless rate dipped to 10.5% in November 2011, according to eurostat, which is the lowest since October 2011.

That still leaves 16.924 million people out of work in the euro area, and 22.159 million in the wider European Union.

So, still too high – and at risk of rising again if the global economy hits serious problems again….

China isn’t the only developing economy to make a bad start to 2016.

A swath of emerging market currencies have weakened since the start of the year, as investors fear that their economies will falter.

Greece’s stock market is sharing the pain:

City workers crossing the Millennium footbridge at dawn.
City workers crossing the Millennium footbridge at dawn today Photograph: Toby Melville/Reuters

City traders may have now dried off after the early morning deluge, but their mood isn’t any sunnier.

Brenda Kelly of London Capital Markets says:

Not unlike the weather in London today, it never rains but it pours. While it’s said that the darkest hour is often before the dawn, nobody appears brave enough to involve themselves in risk assets this morning.

She explains how the Chinese market suspension, the slump in crude oil, and the big drop in China’s foreign exchange reserves are all causing alarm:

The drop in oil prices and China’s Shanghai Composite once again triggering circuit breakers sees major European indexes under pressure while government bonds strengthen across the board.

Trading in China stopped after 29 minutes amid the Shanghai’s Composite tumbled by 7.04%. Forex reserves in China are also lower than what were expected. At the end of December they stood at $3.33 trillion and given that the IMF has recently said that $2.6T is required to maintain the yuan fix, this worse than expected depletion is only bolstering negativity towards the world’s second biggest economy.

A reminder of what triggered today’s rout:

Record fall in China’s foreign exchange reserves

As if there wasn’t already enough to worry about, China has revealed a record drop in its foreign exchange reserves.

New data from the People’s Bank of China show that its FX reserves shrank by $107bn in December – the biggest monthly drop on record.

It suggests that China was forced to use more firepower supporting the yuan last month, as capital flows out of the Chinese economy:

Pound hits five-year low against the dollar

Sterling has just hit its lowest level against the US dollar since the middle of 2010.

The pound has lost half a cent against the greenback today, hitting $1.4561. That’s a five and a half-year low, taking us back to the uncertain times after the 2010 general election.

Worried traders are piling money into the relative safety of the dollar.

As this chart shows, the pound looks stronger against a basket of currencies:

China’s new ‘circuit breaker’ is meant to avoid market volatility. It clearly doesn’t work.

As it stands, if the market falls 5% then trading is suspended for everyone to calm down. It then reopens, allowing investors to recover their nerve.

But as we saw today, a second wave of selling can quickly push the market down by 7% – which is the signal to end trading for the day.

Mark Dampier, head of investment Research at Hargreaves Lansdown, says authorities need to accept that shares are simply overvalued:

Some amazing events on the Chinese stock markets overnight with trading halted for the second time in a week, the second time this year after just 870 seconds of trading…..

Clearly the circuit breaker is having the opposite affect to what is intended and is making things worse. It also stops the market having any chance of bouncing. Had it been introduced during 2015, it would have been triggered 20 times.

The system doesn’t work and until it is withdrawn or modified we can expect to see further use and perhaps shorter trading periods than we saw last night.

The interference by the authorities is simply delaying the inevitable. The market needs to find its own level so we will see more volatility in global markets until it does.

Today’s selloff is causing a lot of angst in the City, and sending investors running for cover.

Terry Torrison, managing director at Monaco-based McLaren Securities, says:

“The extent of the slowdown in China is certainly a worry. Investor sentiment is very fragile at the moment.”

Andreas Clenow, hedge fund manager and chief investment officer at ACIES Asset Management, is equally alarmed:

“It’s looking pretty ugly. We’ve been scaling down equity positions. It’s time to take a step back to re-evaluate the situation.”

(via Reuters)

The Financial Times has a rather smuttier take on Marc Bolland’s time at Marks & Spencer:

Good point, boss.

Updated

Marks and Spencer is defying the global rout!

Its shares are up 1.5%, making it the only riser on the FTSE 100. The City appears to be applauding the news that Marc Bolland is retiring.

Joshua Raymond Chief Marketing Officer at XTB.com explains why:

Bolland has been under intense pressure from major shareholders for his failure to grow the business. And when you look at their recent results, its easy to understand why Bolland had to go and the tough job his replacement, Mr Rowe now finds himself in. Somewhat paradoxically, I expect shareholders to react well to the news that Bolland will now depart after months of speculation.

A drop of 5.8% in general merchandise is simply awful and at the bottom of market expectations. Whilst the firm did enjoy what it claimed was its best ever Christmas week for food sales, like for like food sales over the Q3 period grew 0.4%, which is disappointing though shows M&S fared better than some of its competitors. Overall like for like UK sales fell 2.5%.

Here’s our news story on Bolland’s exit:

The Stoxx 600, which tracks the largest 600 companies across Europe, has fallen by 2.2% this morning.

By my reckoning, that’s a three-month low:

The Stoxx 600
The Stoxx 600 over the last year. Photograph: Thomson Reuters

European markets are also being hit hard, as fears over China’s economy ripple through global bourses.

Germany’s DAX is leading the selloff, tumbling by 2.75% or 281 points to 9,932. Every share in Frankfurt is down, as investors fear that the powerhouse Eurozone economy will suffer if China’s economy hits serious trouble.

The French CAC is close behind, down 2.2%.

FTSE 100 plunges 2% in early trading

The FTSE 100 has tumbled by over 100 points at the start of trading, shedding almost 2% of its value.

The blue-chip index is being dragged down by mining stocks, but every single share is in the red. It’s down 114 points, or 1.9%, right now.

London stock market
London stock market Photograph: Thomson Reuters

The slump in China’s stock market is one obvious factor – but it’s not the only one.

FXTM Research Analyst Lukman Otunuga says investors face a serious of concerns:

Equity markets are continuing their steep losses as we enter the final part of the trading week with investor sentiment being pressured by various different factors.

This includes the resumption of fears over global growth following weak data from China in the beginning of the year, while increased geo-political tensions between Saudi Arabia and Iran and an unexpected nuclear test from North Korea have also encouraged investors to dodge away from riskier assets like stocks. Another threat to investor sentiment is the persistent and continued weakness in the commodity markets, which only today saw the price of oil falling to a fresh 11 year lows of $32.70 for the first time since 2004.

Ding ding….. the European stock markets are open. Brace yourselves for a wave of selling…..

If you can’t sell shares, you may as well crack on with the knitting…..

China trading halted after shares plummet<br />epa05090894 Two stock investors knit in the brokerage house in Qingdao, Shandong province, China, 07 January 2016. Trading was halted for the day on the Shanghai and Shenzhen stock exchanges on 07 January after a steep drop in prices triggered an automatic ‘circuit breaker’ for the second time this week. Prices on the CSI 300 Index plummeted more than 7 per cent in the first 30 minutes of trading. EPA/YU FANGPING CHINA OUT” width=”1000″ height=”665″ class=”gu-image” /><br />
<figcaption> <span class=Two stock investors knitting in the brokerage house in Qingdao, Shandong province, China, today. Photograph: Yu Fangping/EPA

Oil hits 11-year low

Crude oil prices are taking another kicking, tumbling over 5% in early trading.

Brent crude has plunged below $33/barrel for the first time since 2004. It’s currently changing hands at just $32.25 per barrel, a new 11-year low.

And US crude oil has also slumped by 5%, to $32.10 per barrel.

Updated

The Chinese stock market really did suffer a precipitous decline today, triggering the circuit breaker that brought trading to a very early close:

City traders are bracing for a grim start to trading – once they’ve dried themselves (it’s wet today)

Heavy losses in Asia

Asian stock markets are a deep and grimy sea of red today, as fears over China rattle investors across the region.

  • Japan’s Nikkei fell over 2%, shedding 423 points to close at 17,767 points. It’s now down 6.65% since the start of the year.
  • The Hong Kong Hang Seng index is currently down 2.8%,
  • Australia’s S&P/ASX is down 2.2% ,
  • India’s Sensex has lost 1.9%.

Chinese regulators held an emergency meeting today to discuss the crisis — but they haven’t taken any decision on new action, Bloomberg reports.

Chinese trading halted within 30 minutes…

From Beijing, my colleague Tom Phillips sums up the dramatic action in China today:

China halted the day’s trading within 30 minutes of opening on Thursday morning as shares plunged by more than 7% – triggering an automatic “circuit breaker” – and authorities accelerated the devaluation of the Chinese yuan.

China’s recently installed “circuit breaker” mechanism paused trading for 15 minutes after the CSI300 index fell 5% in the first 13 minutes of trading. On resumption of trading it fell further, triggering the day’s halt.

The CSI300 index finished down 7.2%, the SSE composite index fell 7.3% and Shenzhen dropped by 8.3%.

Experts believe that the Chinese authorities may have to take fresh steps to prevent the rout deepening, Tom explains:

Christopher Balding, a professor of finance and economics at Peking University’s HSBC business school, said he expected more government action to halt the stock market drops, “whether it is changing the circuit breakers, whether it is again intervening in the market, whether it is extending the ban on large selling by institutions.”

“I’d be surprised if they let this continue going down. By almost any measure, the Chinese stock market is pretty over valued and so you would be looking at a pretty significant fall to get back to a reasonable valuation. I would be surprised if they allowed it to move back to more appropriate levels.”

“2016 in China is getting off on the wrong foot.”

Here’s Tom’s full story:

Introduction: China market shut again as yuan weakens further

China trading halted after shares plummet<br />epa05090899 Investors play a card game as an electronic board has halted display of stock market data at a securities brokerage house in Beijing, China, 07 January 2016. Trading was halted for the day on the Shanghai and Shenzhen stock exchanges on 07 January after a steep drop in prices triggered an automatic ‘circuit breaker’ for the second time this week. Prices on the CSI 300 Index plummeted more than 7 per cent in the first 30 minutes of trading. EPA/ROLEX DELA PENA” width=”1000″ height=”600″ class=”gu-image” /><br />
<figcaption> <span class=Investors play a card game at a brokerage house in Beijing today, after trading was halted for the day. Photograph: Rolex Dela Pena/EPA

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

There’s no escape from the China crisis. Trading in Shanghai has been suspended for the second time this week, after its stock market plunged at the start of trading.

Automatic circuit-breakers kicked in, leaving nervous investors cooling their heels, after shares in Chinese companies slumped by 7% at the start of trading.

The selloff came as the yuan weakened further against the US dollar, fuelling concerns over China’s economic situation.

From Melbourne, analyst Angus Nicholson of trading firm IG explains:

The great concern for global markets is that the dramatic pace of the currency devaluation seems to indicate a far greater weakness in the Chinese economy than is easily perceivable in its publicly released statistics.

A lot of people in the market are speculating that this is primarily about boosting exports and stimulating the slowing economy. While this no doubt will help, the primary concern for the government is deflation.

Asian markets tumbled following the developments in China, and European stocks are expected to fall heavily at the open too.

Britain’s FTSE 100 is expected to suffer a triple-digit loss:

All in all, it’s a great day for UK chancellor George Osborne is due to give a speech warning that Britain is vulnerable to problems in the global economy.

And we’ll also be digesting financial results from UK retailers Marks & Spencer and Poundland.

The big news at 7am is that M&S’s CEO Marc Bolland is stepping down, after six tricky years at the helm (statement here).

Today’s results don’t look great, frankly, with sales of general merchandise down 5% over the crucial Christmas period….

Updated

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USA 

Rolling coverage of the world’s financial markets, including disappointing results from the weak eurozone inflation report. Investors still seem nervous after Monday’s rout. Eurozone inflation gauge stubbornly stuck at just 0.2% y/y in December…

Powered by Guardian.co.ukThis article titled “European markets still fragile after euro inflation gloom – business live” was written by Graeme Wearden (until 2.15) and Nick Fletcher, for theguardian.com on Tuesday 5th January 2016 15.20 UTC

Given the backdrop of disappointing Chinese data and growing tensions in the Middle East, this week’s US main economic events – the minutes of the Federal Reserve’s rate-rising meeting and Friday’s non-farm payroll figures – will be closely watched. Christopher Vecchio, currency analyst at DailyFX, said:

Weak economic data from across the globe – particularly China and the Euro-Zone – has the US dollar on stronger footing ahead of key event risk this week. Despite some alarming signs coming from the US economy (soft consumption figures, mixed housing data, and recession-level industrial production), investors and traders alike remain focused on ‘the big picture’: how fast will the Federal Reserve tighten policy this year?

With the December Federal Open Market Committee minutes due on Wednesday and the December US non-farm payrolls report due on Friday, market participants – short- or long-term in nature alike – will have a fresh look at where the Fed stands…

Minutes of the last Federal Reserve meeting due on Wednesday.
Minutes of the last Federal Reserve meeting due on Wednesday. Photograph: Richard Drew/AP

Parsing the FOMC minutes and reviewing the details of the December labor reports should help provide enough clarity for judgement to be made on “who is wrong”: either the market, currently pricing in two rates hikes for this year (via Fed funds futures); or the Fed, currently suggesting it will hike rates four times this year.

In the event that the FOMC meeting and the US non-farm payrolls prove to be supportive of the US dollar, it will likely come at the detriment of higher yielding currencies and risk-correlated assets. Any signs that the Fed could tighten policy faster than currently expected, against a backdrop of rising tensions between Iran and Saudi Arabia as well as Chinese/emerging market growth concerns, would seem like a caustic mix of influences for the commodity currency bloc in particular.

US markets edge higher

Wall Street has followed other global markets in attempting to stage a rebound after Monday’s China-induced rout. But as in Europe, the rally is rather tentative.

The Dow Jones Industrial Average is up 42 points or 0.2% in early trading, while the S&P 500 has opened 0.16% better and Nasdaq is 0.3% higher.

In Europe, the FTSE 100 is currently up 0.79% while Germany’s Dax has added 0.33% and France’s Cac has climbed 0.48%.

Oil prices remain under pressure, on fears of falling demand in the wake of the poor Chinese data seen over the past few days. A stronger US dollar is not helping matters, since it makes holding dollar-denominated commodities more expensive. These factors are outweighing the growing tensions in the Middle East – especially between Saudi Arabia and Iran – which could hinder supply.

So Brent crude is currently down 1.2% at $36.77 a barrel, while WTI is nearly 1% lower at $36.40.

Accountancy group ICAEW reckons that British businesses are actually more worried about the domestic situation, rather than problems in China.

A survey of its members found that the the UK economy is the number one concern for 2016.

However, they’re less concerned about the eurozone economy, geopolitics, or the looming referendum on Britain’s membership of the European Union.

Here’s the details:

  • 41% of businesses feel that the growing uncertainty around the UK’s position in the EU could have a negative impact, compared with 50% a year ago
  • Businesses are less concerned about the negative impact of low economic growth in the Eurozone than they were two years ago (44% v 56% in 2014). Although exporters are displaying the same concern than they did last year, with 60% expecting a negative impact.
  • Low UK inflation is expected to have a positive impact on over a third of companies (36%) but over half (52%) would be negatively impacted by any interest rate rise in 2016
  • Instability in the Middle East and Ukraine is much less of a concern to business with 29% of respondents expecting a negative impact (down from 41%).

Midday summary: Markets remain nervous

Time for a quick recap.

European stock markets remain fragile today, after an early attempt to rally back from Monday’s slump floundered.

The main bourses are mixed as traders snatch lunch in the City. The German and French markets are down around 0.5%, while Britain’s FTSE 100 is managing a slight recovery, up 18 point, having been 70 points higher in early trading.

European stock markets, 1pm today
European stock markets, 1pm today Photograph: Thomson Reuters

Investors are bruised following yesterday’s slump, which was the worst start to a trading year since the dot-com crash.

China remains a big worry today.

Overnight, Chinese authorities intervened to prevent another slump on the Shanghai market. State-backed authorities bought up shares, in a bid to prop up values.

This helped the Chinese market to end the day roughly where it started. However, the intervention may also shows that Beijing is worried about future problems, given its slowing economy and the build-up of bad debts since the financial crisis began.

Chris Beauchamp of IG sums up the morning:

Early optimism on the London market has faded as investors continue to fret about the situation in Chinese markets. As in August, state-directed buying of stocks is competing with individual selling of equities, but China’s latest attempt to ‘buck the market’ is likely to end as well as its efforts last year.

The butterfly effect has been felt in Europe again this morning, with an initial bounce giving way to more selling, while in London the FTSE is fighting hard to hold on to small gains.

While Mike van Dulken of Accendo Markets warns:

…the prospect of another Summer-style Chinese rout (the one which made the Fed hold off from hiking) remains a real possibility.

There is disappointment that eurozone inflation remains at just 0.2%, despite the ECB’s stimulus measures.

And there’s also drama in the City. with Sainsbury’s threatening to pounce on Home Retail, the firm behind Argos and Homebase….

….while the unusually warm weather has hurt sales at high street chain Next:

Updated

If Sainsbury takes over Home Retail, it will reunite the company with the homes-and-gardens chain Homebase after a 15-year break.

Sainsbury’s reveals rejected takeover offer for Home Retail

Big news in the City….. supermarket chain Sainsbury’s has revealed that it made a takeover approach to Home Retail (which owns Argos and Homebase).

The offer was made, and rejected, in November, Sainsbury says. It is now considering its position, and has until February 2 to make a new bid.

Rumours have been swirling for weeks that Home Retail could be a takeover target. Sainsbury’s decision to out itself as a possible bidder has send Home Retail shares soaring, up 30%.

dec05hffina
Home Retails’ share price today Photograph: Thomson Reuters

More here:

William Hobbs, head of investment strategy at Barclays Plc’s wealth-management unit in London, sums up the situation well — it’s “really messy” in the markets right now.

He told Bloomberg that investors around the globe are on edge today, and fearing trouble ahead.

“Not much is expected of the world in terms of growth, risk appetite is biased to the downside and weak data from China to the U.S. hasn’t helped at all.

Plenty of people out there believe that the next global recession is imminent.”

US stock markets are expected to post fresh losses today, when they open in three hours time.

The Dow Jones industrial average is tipped to fall by around 100 points, adding to Monday’s 276 point slide.

The euro has lost ground against the US dollar since December’s inflation figures came out. It’s down over half a cent at $1.076.

Although eurozone inflation is clearly weak, it may not be bad enough to force more stimulus out of the European Central Bank, argues Teunis Brosens of ING.

While headline inflation was stuck at 0.2%, core inflation (stripping out energy and food) was also unchanged at 0.9% in December.

Brosens says:

Hawks may argue that weak core inflation is unsurprising given the still high unemployment in many Eurozone countries. Moreover, despite this month’s weakening of core inflation, the presence of second-round effects is not yet convincing.

We think that the ECB will hold its fire for now: it will take more convincing evidence of second round effects or other really disappointing economic news to stir the ECB into further action.

And that’s why shares have fallen back this morning:

So much for the bounce-back. European stock markets couldn’t even stay in the green until London’s pubs opened for the day.

The weak eurozone inflation reading has helped to pull the major indices into the red for the second day running.

The German Dax has shed another 1%, on top of Monday’s 4% slump. The Paris CAC is down another 0.8%, and London’s FTSE 100 is off eight points.

Ipek Ozkardeskaya of City firm London Capital Group says China is still worrying investors, even though Beijing’s central bank, the People’s Bank of China, stepped in overnight to prop up its stock market.

She writes that market sentiment is “very much fragile”:

The apocalyptic Chinese story keeps the headlines busy. The intervention from the PBoC eased tensions at the heart of the storm, yet the chaotic start to 2016 warned of a challenging year ahead of us. The first trading day of the year has clearly wiped away some of the optimism and the risk-off flows dominate.

Shanghai’s Composite opened the day 3.1% lower yet managed to recover later in the session. State-controlled funds bought equities to halt the $590bn worth of sell-off suffered on Monday, and a selling ban for investors would extend beyond a week according to several sources.

Updated

The European Central Bank will be concerned that inflation remained so low last month, says Howard Archer of IHS Global Insight:

Good news for Eurozone consumers but a headache for the ECB as consumer price inflation remained down at 0.2% in December, thereby defying expectations of a small uptick.

The failure of Eurozone inflation to pick up in December is good news for consumers’ purchasing power; but it will maintain ECB concern that prolonged very low inflation could lead to a renewed weakening in inflation expectations thereby making it harder still to get Eurozone consumer price inflation up to its target rate of close to 2%.

December’s unexpectedly weak inflation report is hurting the euro.

The single currency has hit its lowest level against the yen since April 2015. One euro is now worth ¥128.03, down from ¥129.33 earlier.

Eurozone inflation weaker than expected

Breaking: inflation across the eurozone remained uncomfortably weak last month.

Prices across the single currency region rose by just 0.2% annually in December, Eurostat has just reported.

That matches November’s reading, and dashes hopes of a rise to 0.3% or 0.4%.

Cheaper energy costs are partly to blame….. but food and service price inflation did also slow last month:

Eurostat says:

Food, alcohol & tobacco is expected to have the highest annual rate in December (1.2%, compared with 1.5% in November), followed by services (1.1%, compared with 1.2% in November), non-energy industrial goods (0.5%, stable compared with November) and energy (-5.9%, compared with -7.3% in November).

Eurozone inflation

The European Central Bank is meant to maintain inflation close to, but below, 2% — but we’re a long way from that despite the ECB’s quantitative easing stimulus measures….

Updated

UK building firms post stronger growth

UK standard building brick. Image shot 05/2006. Exact date unknown.<br />AWJRH5 UK standard building brick. Image shot 05/2006. Exact date unknown.

Britain’s builders didn’t get much rest over Christmas, judging by the latest healthcheck from the sector.

Data firm Markit reports that output jumped last month, pushing its PMI index up to 57.8 in December, up from a seven-month low of 55.3. That suggests the sector grew at a faster pace last month.

jan05pminew

Markit cited “favourable demand conditions”, with builders reporting that clients were more willing to commit to new projects.

Commercial construction had a particularly good month, with growth hitting its fastest rate since October 2014.

The unusually warm weather in December may also be a factor, as Britain didn’t suffer the kind of heavy snowfalls that can scupper construction work this time of year.

Firms who can build flood defences could be busy in 2016 too, as communities across the country try to shore themselves up.

Updated

This morning’s rally is looking a little fragile, after less than 90 minutes.

European stock markets have shed much of their early gains, and are now broadly flat.

European stock markets

Invesotrs

German unemployment beats expectations

German chancellor Merkel visits China<br />30 Oct 2015, Hefei, Anhui Province, China --- German Chancellor Angela Merkel looks on under a German and a Chinese national flag as she visits the German Academy at the University of Hefei in Hefei, China, 30 October 2015. Merkel is on a two-day official visit to China. Photo: Soeren Stache/dpa --- Image by © Soeren Stache/dpa/Corbis

Here comes the latest measure of German unemployment….. and it’s better than expected.

The number of people out of work across Germany fell by 14,000 last month, on a seasonally-adjusted basis. That smashes expectations of a 6,000 drop, and shows Germany is still outperforming many neighbours.

This leaves its unemployment rate unchanged at 6.3%, compared to a eurozone average of 10.7%.

Spain has also reported that its jobless total shrank by 8% last year:

Updated

Mining stocks are leading this morning’s rally in London.

Commodity giant Glencore is up over 4%, as fears over China ease a little (for the moment….)

Top risers on the FTSE 100
Top risers on the FTSE 100 today Photograph: Thomson Reuters

Tony Cross of Trustnext Direct says traders are taking their cue from Asia:

London’s FTSE-100 has recovered some of yesterday’s losses at the open, thanks in no small part to the fact that Asian equity markets appear to have stabilised overnight – at least for now.

The vast majority of blue chips are trading in positive territory although the handful of losing stocks are being dominated by clothing retailers with that trading update from Next this morning providing little reason to get excited about the sector.

Updated

High street chain Debenhams’ shares have fallen by 2% in early trading.

That reflects concerns that Next’s weak sales over Christmas could be mirrored across the sector. Marks & Spencer are down 0.5%.

Shares in Next are out of fashion this morning.

They’re down by 3% at the start of trading, leading the FTSE fallers, as the City digests this morning’s disappointing Christmas trading.

Here’s some reaction:

Updated

Market open: European shares bounce back

Shares are rallying across Europe at the start of trading, as investors recover their nerve after Monday’s heavy selloff.

In London, the FTSE 100 has jumped by 72 points, or 1.2%, to 6165 points. That claws back almost half of yesterday’s rout, when the blue-chip index shed 148 points.

The French CAC, German DAX, Spanish IBEX and Italian FTSE MIB are all up around 1.1%.

Yesterday, the DAX slumped by over 4%, so today’s rally is only a partial recovery.

Traders are encouraged by the news that Chinese authorities took action overnight to prevent their stock market tumbling again.

Jasper Lawler, market analyst at CMC Markets, explains:

In the aftermath of a global sell-off over China growth fears, UK and European stock index futures are taking their cues from the Chinese stock market on Tuesday.

After an initial wobble, shares in Shanghai and Shenzhen turned positive on Tuesday thanks to an injection of liquidity from the People’s Bank of China.

Next blames warm weather for weak Christmas

Next results<br />File photo dated 04/12/12 of a Next Retail store, as the High Street chain blamed unseasonably warm weather for a “disappointing” performance in the run-up to Christmas as it posted a fall in store sales and sharp slowdown in its Directory business. PRESS ASSOCIATION Photo. Issue date: Tuesday January 5, 2016. The retailer said full-price sales fell 0.5% across its stores in the 60 days to December 24, while sales across its Next Directory online and catalogue arm lifted 2%. See PA story CITY Next. Photo credit should read: Paul Faith/PA Wire

High street retailer Next has sent a shiver through the sector this morning, after posting weaker than expected results for the crucial Christmas period.

Full price sales rose by just +0.4% from 26 October to 24 December. That’s a serious slowdown, as Next sales grew by 6% between July and September.

And as Next is the first major European retailer to report Christmas trading figures, this may mean more trouble ahead…

Next pinned much of the blame on the unusually warm weather this autumn. This is a classic excuse for British retailers, who can often point to the skies to explain away a poor performance.

But to give Next credit, it also released a graph showing how sales did indeed shrink in weeks where the temperature was hotter than in 2014:

Next sales

And the weather isn’t the only culprit. The firm also admits that its catalogue shopping arm, NEXT Directory’s, suffered poor stock availability from October onward.

Updated

Spread-betting firm IG is predicting that European markets will bounce back when trading begins in a few minutes, clawing back some of Monday’s losses.

IG is calling the main markets up around 1%:

Chinese authorities intervene to prop up markets

Chinese shares make modest gains after Monday rout<br />epa05088128 Chinese investors look at a screen showing stock movements at a stock brokerage house in Beijing, China, 05 January 2016. Shares in China made modest gains 05 January morning, the day after a plunge in the market triggered a halt to trading. The CSI 300 Index was up 0.79 per cent when the market shut for its lunch break. The index comprises 300 shares from the biggest companies on the Shanghai and Shenzhen exchanges. EPA/HOW HWEE YOUNG
Chinese investors look at a screen showing stock movements at a stock brokerage house in Beijing. Photograph: How Hwee Young/EPA

It’s been a wild day in China, as Beijing tries to prevent a repeat of Monday’s rout.

Chinese authorities intervened in the markets today, buying up stocks to give investors confidence.

And it appears to have worked. The Shanghai composite index has closed for the day, down just 0.28%, having shed 3% at one stage today.

That’s rather better than Monday’s 7% slump, which forced trading to be halted.

That doesn’t address the underlying problems in China, such as the build-up of bad debts and its slowing economy. And it suggests Beijing isn’t prepared to allow market forces to take their natural course….

Updated

Introduction: Markets could stabilise after Monday’s rout

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

It’s day two of the trading year, and investors around the globe will be hoping for a better performance than on day one.

There’s a nervous air in the markets today, after yesterday’s selloff wiped hundreds of billions of dollars off bourses worldwide. Britain’s FTSE 100 lost £38bn in a blink of an eye:

But unlike vanishing candyfloss, market value can reappear.

And European stock markets are expected to recover some ground today. But it could be another volatile session, with concerns over China’s economy looming over markets.

Also on the agenda today, we get the first estimate of eurozone inflation for December. Economists predict it will rise to an annual rate of 0.4%, from 0.2% in November.

We also get the latest German unemployment data for December, and an estimate of how UK builders fared last month.

  • 8.55am GMT: German unemployment report
  • 9.30am GMT: UK construction PMI
  • 10am: Eurozone inflation for December

And high street retailer Next is reporting its financial results for the last quarter. That will give us an insight into how the crucial Christmas trading season went…..

guardian.co.uk © Guardian News & Media Limited 2010

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U.S. dollar strengthens along with emerging market currencies, euro and pound fall, and Wall Street extends gains following better-than-expected U.S. consumer confidence numbers, as markets reopen after the Christmas holiday break…

Powered by Guardian.co.ukThis article titled “Global markets climb on rising US confidence and higher oil prices – live” was written by Katie Allen and Julia Kollewe (now), for theguardian.com on Tuesday 29th December 2015 16.17 UTC

On Monday, the rouble hit its lowest level this year, pressured by sliding oil prices. The Russian economy is heavily reliant on crude and natural gas, which together account for almost half of state revenue.

But today, the Russian currency has recovered, boosted by higher oil prices and a Bloomberg report that former Russian finance minister and investor favourite Alexei Kudrin is in talks with Vladimir Putin about returning to a senior post to help deal with the country’s worsening economic troubles.

Let’s take a look at currency markets. The US dollar is up against the euro and other major currencies, but has slipped against the Russian rouble, which has been been lifted by higher oil prices. Brent crude is nearly 3% higher on the day.

Investors are snapping up riskier assets, including stocks and emerging market currencies, on the back of the rally in oil prices. This has hurt the euro, which is regarded as a safer currency, given its low yield.

Away from the markets, here’s some good news for UK consumers. Companies that plague householders with nuisance phone calls and texts face fines totalling more than £1m this year and next, a government watchdog has warned after tripling the financial punishment for rogue callers in 2015, our consumer affairs correspondent Rebecca Smithers writes.

The information commissioner’s office received about 170,000 complaints in 2015 from people who had received nuisance calls and texts – a slight decline on last year, when the total was 175,330.

You can read our full story here.

Nuisance call firms

Nuisance call firms Photograph: Richard Pohle/The Times/PA

The most recent fine came earlier this month when the ICO fined the Telegraph Media Group £30,000 for sending hundreds of thousands of emails on the day of the general election urging readers to vote Conservative, breaking the rules around direct marketing.

Here is a list of other fines imposed this year:

  • A record £200,000 fine in September to Home Energy & Lifestyle Management Ltd (Helms), a solar panels company that made 6m nuisance calls to householders.
  • A £130,000 fine in October to Pharmacy 2U Ltd, a company that was selling customer details to postal marketing companies. Buyers of the details included a health supplements company cautioned for misleading advertising.
  • A £90,000 fine in November to Nuisance Call Blocker Ltd for making unsolicited marketing calls to sell cold-call-blocking devices. The Poole-based company was telephoning people to sell a call-blocking service and device to stop the same type of calls the company itself was making.
  • A £80,000 fine to UKMS Money Solutions Ltd, a PPI claims firm that sent 1.3m spam text messages to mobile phone numbers it had bought from list brokers.

Updated

Gold has benefited from the rally in oil prices, but gains were limited by a stronger dollar. Spot gold edged up 0.1% to $1,070.05 an ounce in thin trading.

The precious metal is still on course for its third year of losses, pressured by the prospect for more rate hikes in the US. It is likely to end the year nearly 10% lower from the previous year, mainly due to expectations that higher US interest rates will hit demand for gold.

ABN Amro analyst Georgette Boele said:

Gold’s down trend is likely to continue throughout 2016…. there are going to be more US rate hikes than the market is anticipating the next year.”

Brent crude is nearly 3% higher, rising more than a dollar to $37.70, after hitting 11-year lows.

Here is Connor Campbell again, financial analyst at Spreadex:

A slightly better than expected goods trade deficit (at $60.5bn against the $60.9bn anticipated, but still greater than last month’s $58.4bn) and a much better than forecast CB consumer confidence figure helped the Dow Jones open at, and maintain, a 170 point jump this Tuesday. That leaves the US index at a 12 day high, and with a slim chance of edging into the green in terms of year-long growth before the end of trading on Thursday.

This has given a further boost to eurozone stocks, already buoyant on the rising oil price. Germany’s Dax is nearly 180 points, or 1.66%, ahead, while France’s CAC has gained almost 70 points, or 1.45%.

The FTSE 100 index in London is some 33 points ahead, or 0.5%.

Campbell says:

The FTSE likely would have been higher if wasn’t for the gains made by its housing sector being effectively negated by the Scrooge-like commodity stocks and a renewed slide from the supermarket sector. News that the sale of its pharmacy business to Celesio would be undergoing an in-depth investigation, as ordered by the CMA, caused a specific headache for Sainsbury’s [down 1.2%].

More generally, news that Amazon intends to substantially expand its grocery delivery service Pantry in the New Year caused the likes of Tesco and Morrisons to tumble, with the online-only Ocado Group [plunging more than 4%] especially spooked by the announcement.”

Here is our story on Amazon.

Adam Button, currency analyst at Forex Live, says about the rise in US consumer confidence:

It’s strong but still well below where it was in September. The revision to the November reading meant it was the worst since July, not the worst since Sept 2014.”

Stocks on Wall Street are extending gains on the better-than-expected US confidence numbers, with the Nasdaq and the Dow Jones up around 1% and the S&P 500 0.8% ahead.

Lynn Franco, director of economic indicators at the Conference Board, said:

Consumer confidence improved in December, following a moderate decrease in November. As 2015 draws to a close, consumers’ assessment of the current state of the economy remains positive, particularly their assessment of the job market.

Looking ahead to 2016, consumers are expecting little change in both business conditions and the labor market. Expectations regarding their financial outlook are mixed, but the optimists continue to outweigh the pessimists.”

The monthly survey is conducted for the Conference Board by Nielsen. The cutoff date for the preliminary results was 15 December.

You can read the full consumer confidence report here.

US confidence improves

The latest US consumer confidence numbers are out. The Conference Board consumer confidence index improved to 96.5 in December, from a revised 92.6 in November, beating expectations of a reading of 93.5.

Updated

Barclays Capital agrees $13.75m US settlement over mutual funds

Staying on the other side of the Atlantic for the moment, the US regulator FINRA has settled with Barclays Capital over mutual funds. The Financial Industry Regulatory Authority has ordered Barclays Capital to pay $13.75m for unsuitable mutual fund transactions and related supervisory failures.

The British bank’s investment banking arm will have to pay more than $10m in compensation, including interest, to affected customers, and has been fined a further $3.75m by the regulator. It said in a statement:

FINRA found that from January 2010 through June 2015, Barclays’ supervisory systems were not sufficient to prevent unsuitable switching or to meet certain of the firm’s obligations regarding the sale of mutual funds to retail brokerage customers….

In concluding this settlement, Barclays neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.”

You can read the statement in full here.

Updated

Wall Street opens higher

Shortly after the opening bell on Wall Street, shares are higher, mirroring a rally in oil prices.

The tech-heavy Nasdaq index is up 0.7%, the Dow Jones industrial average is up 0.9% and the S&P 500 has added 0.8%.

In the UK, the FTSE 100 is up 0.6% while Brent crude is up 2% at $37.4, creeping further asway from an 11-year low hit last week.

US house price inflation edges up

Homes for sale

Figures just out in the US suggest home prices there rose at a slightly faster pace in October compared with September and a touch above economists’ forecasts.

The S&P/Case Shiller index of 20 metropolitan areas rose 5.5% on a year earlier in October. That was faster than 5.4% inflation for single-family home prices in September and beat the forecast for 5.4% in a Reuters poll of economists.

The survey authors said San Francisco, Denver and Portland continue to report the highest year-over-year gains among the 20 cities with another month of double-digit price increases of 10.9% for all three.

Commenting on the latest report [PDF], David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices says:

“Generally good economic conditions continue to support gains in home prices.

“Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction including single family housing starts.”

He also highlights the impact on sentiment among potential homebuyers from the US central bank’s move to raise interest rates earlier this month – the first increase for almost a decade:

“The recent action by the Federal Reserve raising the Fed funds target rate by 25 basis points and spreading expectations of further increases during 2016 are leading some to wonder if mortgage interest rate might rise. Typically, increases in short term interest rates lead to smaller increases in long term interest rates … From May 2004 to July 2007, the Fed funds rate moved up from 1.0% to 5.25%; over the same period, the mortgage rate rose from about 6% to 6.75% during a sustained tightening effort by the Federal Reserve. The latest economic projections published by the Fed following the recent rate increase suggest that the Fed funds rate will be around 2.6% in September 2017 compared to a current rate of about 0.5%. These data suggest that potential home buyers need not fear runaway mortgage interest rates.”

US mortgage rates and the Fed funds rate

Competition watchdog to probe Sainsbury’s pharmacy sale

Tablets

The Competition and Markets Authority (CMA) in the UK has confirmed it is referring the sale of Sainsbury’s pharmacy business for an in-depth investigation.

In a statement, the CMA says the proposed acquistion of the business by Celesio, the owner of Lloyds Pharmacy, will be probed further after Celesio had failed to address the watchdog’s concerns about competition being affected.

The CMA says:

The CMA’s initial investigation identified 78 local areas where customers may be affected by a loss of competition between Lloyds Pharmacy (a Celesio subsidiary) and Sainsbury’s pharmacies. The CMA also indicated that in other local areas it had been unable to reach a positive conclusion on whether the merger gives rise to a realistic prospect of a substantial lessening of competition.

Celesio has not offered any undertakings in lieu and the CMA will therefore now refer the merger.

A decision on the merger will be made by a group of independent panel members supported by a case team of CMA staff. The deadline for the final report will be 13 June 2016.

Sainsbury’s announced back in July that it had sold its 281-store pharmacy business to Celesio for £125m.

Under the deal, Lloyds will rent out and run Sainsbury’s 277 in-store pharmacies and take over four located in hospitals.

More pressure on Britain’s big supermarkets

Groceries

The focus will be firmly on retailers’ shares in coming days as the trading updates from the crucial Christmas season roll in.

We already know Britain’s supermarkets have been struggling as shopping habits change and as discounters like Lidl and Aldi take market share and intensify a fierce price war. Now Amazon is preparing to crank up the pressure on grocers by dramatically expanding the range of food products it sells.

My colleague Graham Ruddick has been talking to Christopher North, UK boss of the online retailer. North says Amazon plans to expand its Pantry service rapidly in the new year.

Here’s the full story:

Markets edge up, Wall St looks to open higher

On Wall Street the US futures market is pointing to a higher open, helped by a modest rise in oil prices, traders say.

In the UK, the FTSE 100 is up 0.4%, or 24 points, at 6278. Housebuilders are among the biggest risers while the miners again feature among the biggest fallers as aluminium and copper prices head lower.

Connor Campbell, analyst at spread betting company Spreadex highlights that the FTSE is underperforming its European peers:

“Whilst thin(ish) trading volumes appear to be enhancing whatever nascent positive sentiment there is in the eurozone, allowing the DAX and CAC to stretch out their legs to hit fresh 20-day highs, the FTSE hasn’t been so lucky this Tuesday morning.

“Despite a strong set of housing stocks (Persimmon and Berkeley Group leading the charge), lifted by both news of record high UK prices and the potential windfall from the cost of rebuilding and repairing the numerous homes damaged in the northern floods, and a stable oil price, the UK index is struggling to match its Eurozone peers, hampered by a still grumpy mining sector. There are no real signs that the latter issue could turn around this afternoon… As ever those same commodity stocks that have plagued the FTSE throughout 2015 are trying to ensure it ends the year not with a bang but a whimper.”

Saudi stocks hit after oil plunge swells deficit

Aramco Oil Refinery in Saudi Arabia.

Aramco Oil Refinery in Saudi Arabia. Photograph: MyLoupe/UIG via Getty Images

The plunge in oil prices this year has taken its toll on Saudi Arabia’s state coffers and today the fallout is being fell in its stock market.

Late on Monday, Saudi Arabia announced plans to cut government spending and reform its finances after the drop in oil prices resulted in a record annual budget deficit of nearly $98bn (£66bn).

The the world’s top crude exporter ran a deficit of 367bn riyals ($97.9bn) in 2015, or 15% of gross domestic product, officials said.

Today, the Saudi stock index dropped 3% in early trading and is currently down around 1.5% as traders digest the prospect of spending cuts and tax rises in the biggest shake-up to economic policy there for more than a decade. The finance ministry is also changing subsidies for water, electricity and petroleum products over the next five years.

Saudi Arabia’s stock index:

Saudi Arabia's stock market

Brent crude is still just about eking out some gains today after Monday’s sell-off. It is currently up around 0.3% or 0.1 cents to $36.7 per barrel. It is not far off an 11-year low of $35.98 hit last week.

There are signs that the global glut of oil will deepen in 2016 as a market already awash with oil from the two biggest suppliers – Saudi Arabia and Russia – receives additional supply from the lifting of sanctions against Iran and the ending of a 40-year US export ban.

Time for a quiz?

A turkey sandwich with cranberry sauce.

A turkey sandwich with cranberry sauce. Photograph: Graham Turner for the Guardian

Trading volumes are particularly thin on European markets today and it seems many (sensible) people have taken a few days off between Christmas and the New Year. For those who are in the office today, dare we suggest the holiday lull might offer a chance to take an end of year quiz or two while you tuck into your turkey sandwiches.

We’ll keep it strictly business-related:

There is, of course, our own very broad business quiz covering (almost) everything from Cadbury’s Fruit and Nut bars to Libor-rigging and Greece’s brush with Grexit:

If central banks are your thing, this is from Bank Underground, a blog for Bank of England staff:

Deloitte’s chief economist, Ian Stewart, set the quiz for newspaper City AM. The questions are notably offbeat, including one on the world’s “most sleep-friendly airport”:

The BBC’s business team has put together these 10 questions, including some typically flowery Yanis Varoufakis quotes:

New floods threaten the UK with Storm Frank on the way and as we reported earlier, estimates of the costs so far are already in the billions.

For live coverage of the flooding and its fallout, you can follow our blog here:

While accountants have sought to put a figure on the cost of damage so far, economists note that counting up the economic impact overall is a very tricky task.

Howard Archer, economist at the consultancy IHS Global Insight, sends through these comments explaining that damage from extreme weather can dent some spending in the short term but then boost other areas of spending, notably repair work, further out:

https://twitter.com/HowardArcherUK/status/681082677676621824

“In purely economic/GDP costs, the net overall impact of the floods will be limited. There will be some near-term hit to the economy (but even this will be relatively limited given the overall size of the economy) but this will be offset by some gains further out). But this will not tell the whole story by a long way – especially for the poor individual people and businesses that are affected.

“Looking at the extent of the flooding, it could well shave 0.2-0.25 percentage point off GDP growth in the near term. As the flooding is occurring late on in the fourth quarter, some of this negative impact is likely to occur in the first quarter of 2016.

“This is the consequence of businesses not being able to open, loss of agricultural output, people not being able to get to the shops, travel etc. There is also the cost to insurance companies. There is also the loss of work from those people not actually able to get to work.

“However, damage to personal property does not affect GDP growth, although it is obviously a disaster for the poor people involved. And GDP measures do not capture the stress that the people/businesses affected incur.

“Further out there will be some boost to GDP growth through the construction work that will be generated by major repair work to buildings and infrastructure and replacement buildings. There will also be a positive impact to growth coming from the replacement purchases of furnishings, household goods etc lost or damaged during the flooding.

“The boost to growth from the construction work and replacement purchases will be spread out, but some will likely start occurring in the first quarter of 2016 which will at least partly offset the hit to activity at the start of the quarter.”

New record for UK house prices

  • The prospect of stamp duty changes in April has prompted a rush into the UK property market from buy-to-let investors and helped lift the average UK house price above £230,000 mark for first time, according to one estate agent chain today.
  • Haart, the UK’s largest independent estate agent, says the average UK house price was up 3.7% in a month and 13.4% on the year to reach £231,857 in November.
  • London property prices saw the fastest monthly increase for six months, up 3.4% to £525,780.
  • Overall, the number of new buyers rose 7.5% on a year earlier. There were signs, however, that the buy-to-let rush and related price rises were deterring first-time buyers from the housing market. The number of first-time buyers declined 7% on the month, haart said, using figures from some 100 branches around the UK.

Its chief executive Paul Smith comments:

“UK house prices rose 13.4% annually and 3.7% on the month to break records again in November. This is the steepest monthly and annual increase on record and follows a surge in registrations from buy-to-let investors since the Autumn Statement in anticipation of the 3% stamp duty surcharge which is effective from the 1st of April 2016. This could mean the stamp duty payable on a property worth £275,000 could rise from £3,750 to £12,000.

“Although first-time buyer house prices have remained relatively stable, up just 1.1% in the last month, I expect these to shoot up over the coming months as first-time buyers face fierce competition from buy-to-let investors. The pressure is already being felt by many with demand among first-time-buyers already down 7% in the last month alone. While first-time buyers may face a tough couple of months, once the stamp duty changes come into effect in April, demand from buy-to-let investors is likely to recede so we should see a recovery in prices at this level.”

Deutsche Bank shares are up this morning after news it is selling its 20% stake in Beijing’s Hua Xia Bank, making it the latest Western business to pare back its links to China.

As Reuters reports, Deutsche is selling the stake to Chinese insurer PICC Property and Casualty Co in a deal worth up to $4bn (£2.69bn).

It is the latest move in the German bank’s drastic restructuring by new chief executive, John Cryan.

Shares in Deutsche are up 2.4% while the wider German Dax index is up 1.6%.

High street banks.

As Britain’s big banks carry on with long task of patching up their reputations, they have new report cards to pore over from the body set up to improve standards in the wake of the Libor-rigging crisis.

Dame Colette Bowe, chair of the Banking Standards Board (BSB), has likened the assessments of the behaviour and culture inside the major banks to the reports delivered by auditors, which are signed off by the partner at the accountancy firm which has assessed their books and is included in their annual reports. The BSB will publish its own annual report in the spring.

The first such set of report cards have been sent to the founder members: Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander and Standard Chartered and Nationwide Building Society.

There is also talk of making bankers swear an hippocratic oath in the way that doctors do but that seems to be some way off.

My colleagues Jill Treanor and Larry Elliott have the full story:

Fitness trackers

Fitness trackers Photograph: Katherine Anne Rose for the Observer

It looks like it was a very merry Christmas for Fitbit, the US-listed maker of wearable health monitors. Reports that its app topped download charts on 25 December suggest plenty of people were unwrapping new gadgets from the firm on Christmas day and that helped lift its shares on Monday. They closed up 3.3%.

Back in November, Fitbit reported a 168% surge in revenues in its third-quarter earnings report.

In the UK, department store chain John Lewis recently highlighted Fitbits as it reported record Black Friday sales. Overall sales of wearable technology such as fitness monitors up 850%. Sales of Fitbit trackers were up 1,200%.

Puts a whole new spin on new year’s healthy living resolutions when your wristband can tell you when you are cheating…

Markets update: Oil steadies, FTSE bobs around unchanged mark

After its little Christmas break the FTSE 100 has re-opened this morning and struggling to find some direction. The bluechip index of London-listed shares is up around 8 points, that’s just 0.1%, at 6263.

That is down around 5% from where the index started 2015 at 6,566. With a sharp sell-off in global commodities, from copper to oil, providing much of the FTSE’s direction this year, it had climbed to a 2015 high of 7122.7 on 27 April but hit a low for 2015 of 5768.2 on 24 August. The index’s average level for the year is 6,592.6, according to Thomson Reuters.

Here’s how the FTSE looks for the year:

The FTSE 100 in 2015

The FTSE 100 in 2015 Photograph: Thomson Reuters

Oil prices meanwhile look set for further falls after already plunging this year. Brent crude shed another 1.3% on Monday but this morning the price per barrel has edged back up 0.5% to $36.8 with traders citing colder temperatures in Europe as boosting demand prospects.

Brent crude in 2015:

Brent crude in 2015

Brent crude in 2015 Photograph: Thomson Reuters

Elsewhere, Asian stock markets edged up overnight on the steadier oil price, there is a small boost to European stock markets from firmer financial stocks this morning and copper prices are falling again.

Introduction: Floods impact, FTSE re-opens

Good morning and welcome back to our live blog covering financial markets and business and economics news from around the UK and the world.

As the north of England and Scotland brace for the arrival of yet another storm later, towns, households and businesses are counting the cost of the flood damage so far.

The morning newspapers put varying figures on the devastation, citing estimates from insurers, accountants and economists.

Here is our own main story overnight that the cost of the winter floods across the UK will breach £5bn, with about a fifth of the bill falling on those with inadequate or non-existent insurance policies.

That’s according to accountants at KPMG, who warn the insurance policies of many of the worst hit would not cover the full losses. Here’s the full story:

As pressure mounts on the UK government over its spending on flood defences, the Mirror condemns a “£6bn Floods Shambles”:

The i newspaper goes with the £5bn figure and like others, highlights pressure on prime minister David Cameron:

We’ll be following updates on the expected economic impact of the storms throughout the day.

Also on the agenda, the FTSE 100 re-opens after the Christmas break and it is looking like the bluechip index will end the year pretty close to where it started it, after gains in the first half were wiped out by losses for heavyweight commodity-related stocks since the summer. The FTSE 100 has just opened up 0.1%.

After some choppy trading sessions for global oil prices, Brent Crude is fairly flat this morning, at $36.7, and its movements today will again be providing some direction to stock markets. It’s worth keeping in mind that thin holiday trading could make for some volatile moves.

We will also be keeping an eye out for updates from retailers as they tot up takings from the all-important Christmas shopping and sales season.

In the US later there are a handful economic releases: November’s trade balance (at 1.30pm GMT), October home prices from Standard & Poor’s/Case-Shiller (at 2pm GMT) and consumer confidence figures from the Conference Board (at 3pm GMT).

Updated

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If the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission…

Powered by Guardian.co.ukThis article titled “Democratic decisions on benefits of the EU” was written by Letters, for The Guardian on Tuesday 15th December 2015 19.32 UTC

Zoe Williams misses the point about Cameron’s negotiations with EU member states (There is no master plan. On the EU, Cameron is flailing, 14 December). Restricting benefits to EU migrants may or may not be a sensible, legal or logical way to meet the concerns of people, be they “Ukip-minded” or not. But once our PM had to ask permission to do so, the issue was completely transformed. It is no longer one of EU migrants’ access to benefits, but the far more fundamental question of who decides how British taxpayers’ money is spent. It became a question of national sovereignty. That’s why organisations such Trade Unionists Against the EU are not awaiting the outcome of “negotiations” and are campaigning to get the UK out. The issue is as simple as it is clear: if the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission. This will continue to be the case while the UK remains a member of the EU.
Fawzi Ibrahim
Trade Unionists Against the EU

• David Cameron’s negotiations on limiting in-work benefits for EU immigrants appear to have won little support. One simple approach might be to limit levels of benefit to those payable in the country of origin of the European migrant. That would deter those seeking to exploit the system and could disarm politicians in other member states, who would no longer be able to claim that their emigrants were being monetarily disadvantaged. It would leave the fundamental right of freedom of movement untouched.
Ken Daly
Aisholt, Somerset

• Hans Dieter Potsch, the chairman of Volkswagen, glosses over the truth of what his company did to cheat emission tests: it wasn’t a “chain of errors”, it was a chain of liars prepared to sanction a management mindset (VW admits to ‘chain of errors’ at company, 11 December). Or is he not admitting responsibility, even though he is no doubt paid a monstrous salary on the basis of being in charge? This incident just confirms that all companies need active oversight from outside to try and stop such appalling actions. They cannot be trusted any more than managers of banks and other financial groups. This is why we need the EU and strong legislation trying to stop such abuses in companies that think they can do what they like.
David Reed
London

• Join the debate – email guardian.letters@theguardian.com

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Investors believe Mario Draghi could impose deeper negative interest rates and unleash more QE tomorrow. UK construction growth hits seven-month low. Latest: eurozone inflation just 0.1%. Citi predicts big moves from Draghi tomorrow…

Powered by Guardian.co.ukThis article titled “Euro weakens as eurozone inflation boosts stimulus hopes – business live” was written by Graeme Wearden, for theguardian.com on Wednesday 2nd December 2015 17.01 UTC

After a fairly undramatic day, London’s stock market has closed higher:

In 24 hours we’ll know exactly what Mario Draghi and co have decided.

In the meantime, City analysts continue to speculate — and perhaps prepare the ground for some ‘I told you so’ action.

Capital Economics have nailed their trousers to the mast, forecasting steeper negative interest rates on banks, and a serious QE boost.

Brian Davidson says:

We have long argued that the ECB would need to add more stimulus before long, and the consensus has come round to this view following a series of dovish signals by the ECB. Accordingly, markets are now pricing in a cut of around 10bp to the deposit rate and polls show that most economists expect a €15bn increase in monthly asset purchases. We think the ECB will cut the deposit rate by 20bp, and increase its monthly asset purchases by €20bn.

Updated

Thursday’s ECB meeting could be quite combative, as some central bank governors are reluctant to provide more stimulus.

The German contingent are particularly concerned, as the Wall Street Journal explains:

Several officials have expressed skepticism that more stimulus is needed at this time, led by the ECB’s two German officials, Bundesbank President Jens Weidmann and ECB executive board member Sabine Lautenschläger. Central bankers from Baltic euro members have also signalled resistance, making it unlikely that Thursday’s decision will be a unanimous one.

More here:

Newsflash from Ontario: The Bank of Canada has left interest rates unchanged at today’s policy meeting.

Money is also flowing into eurozone government bonds today, on anticipation that the ECB will boost its QE programme.

This has driven the yield, or interest rate on German two-year bonds deeper into negative territory – which means the price is at a record high.

The pound is tumbling on the FX markets today.

It just hit a new seven and a half-month low against the US dollar at $1.4979.

Sterling is being hit by two events

Back to the eurozone.

Swiss bank UBS have produced a nifty chart showing the main options which the ECB could deploy tomorrow…..and the likely impact on the markets.

ECB policy options

Updated

US private sector job creation hits five-month high

A strong dose of US employment data has just increased the chances that the Federal Reserve raises interest rates in two weeks time.

A total of 217,000 new jobs were created by US companies last month, according to the ADP Research Institute.

That’s the biggest rise in private sector payrolls since June, and beats forecasts for a 190,000 increase. It also beats October’s reading of 196,000, which was revised up from 182,000.

It suggests that the wider Non-Farm Payroll will show a robust labour market. The NFP is due on Friday, and is the last major data point until the Fed’s December meeting.

US ADP Payroll

US ADP Payroll Photograph: ADP / fastFT

As fastFT puts it:

Although the ADP survey has not proved a consistent forecaster of the official monthly government jobs numbers, they may soothe investors nerves ahead of an important period for economic data and central bank decisions.

The euro has fallen back today, in another sign that Draghi is expected to announce new stimulus measures tomorrow.

The single currency dropped back through the $1.06 mark against the US dollar today, which is a near eight-month low.

Euro vs US dollar today

Euro vs US dollar today Photograph: Thomson Reuters

This is a handy chart, showing the three main options in the ECB’s toolbox, and the way they could be deployed:

There’s no realistic chance that eurozone inflation will hit the forecasts drawn up by the ECB’s own economists three months ago.

That’s the view of Timo del Carpio, European Economist, RBC Capital Markets, who told clients:

The most recent staff projections from the ECB (published in September) revealed an expectation for HICP [inflation] to average 0.4% y/y over Q4/15 as a whole.

Taking into account today’s outturn, this would require the headline rate to rise to at least 0.8% y/y in December in order for those forecasts to still be valid. Suffice to say, we think that is too tall an order, even taking into account the expected base effects from last year’s oil price declines (expected to come into force primarily in December and January).

In other words, this outturn should represent further downside news for the ECB.

And that’s why del Carpio predicts a further 20 basis point cut to the deposit rate, and a 6-month extension to the QE asset purchase programme .

It’s all systems go for more ECB stimulus, says Jonathan Loynes, chief European economist at Capital Economics:

“November’s weaker-than-expected eurozone consumer prices figures give a final green light for the ECB to both increase the pace of its asset purchases and cut its deposit rate at tomorrow’s policy meeting.”

Loynes is also concerned the core inflation – which excludes volatile components such as energy prices – dropped from 1.1% in October to 0.9% in November.

(FILES) A picture taken on August 7, 2014 shows the Euro logo in front of the European Central Bank, ECB in Frankfurt am Main, western Germany. Financial markets are looking to the European Central Bank to open the cash floodgates next week after consumer price data showed the 18-country eurozone is flirting with deflation, analysts said. AFP PHOTO / DANIEL ROLANDDANIEL ROLAND/AFP/Getty Images

Ruben Segura-Cayuela, a euro zone economist at Bank of America Merrill Lynch, believes the weak inflation report will have surprised the European Central Bank, in a bad way.

With inflation stuck at just 0.1%, Segura-Cayuela believes the ECB will boost its bond-buying QE programme from the current rate of €60bn per month.

I’ve taken the quotes off Reuters:

“It [the inflation report] is not consistent with the trend that the ECB was expecting.

We are expecting a one year extension on QE purchases and quantities to go up to as much as €70bn a month.”

Segura-Cayuela is also in the ‘deeper negative rates’ camp — he reckons the deposit rate on bank deposits at the ECB could fall from -0.2% to -0.3%.

European stock markets are still rallying after the inflation data reinforced hopes of more eurozone stimulus:

European stock markts

Bloomberg’s Maxime Sbaihi also expects significant action from the European Central Bank tomorrow:

Updated

Economist and ECB watcher Fred Ducrozet has found a chart showing how weak inflation will prompt extra QE from the European Central Bank.

The x-axis shows the forecast for inflation — the ECB’s target is just below 2%.

The y-axis shows how much extra bond-buying would be needed if inflation is falling short — red if the ECB is struggling to push funds into the real economy, and grey if the ‘transmission mechanism’ is working well.

And as Fred tweets, today’s poor inflation data suggests anything between €400bn and one trillion euros of extra QE could be required.

Citi predicts lots more QE.

Citigroup has predicted that Mario Draghi will make two serious announcements tomorrow.

1) They expect him to hit the banks with more severe negative interest rates, by cutting the deposit rate at the ECB to minus 0.4% (compared with minus 0.2% today).

2) In addition, they suspect Draghi will boost the ECB’s bond-buying programme from €60bn per month to €75bn per month….

…and also run the quantitative easing programme for another six months. So rather than ending in September 2016, it would continue to March 2017.

That adds up to around €585bn of extra QE, I reckon.

City traders are predicting that Mario Draghi will announce a significant increase in the ECB’s stimulus measures on Thursday:

This weak inflation report could provoke the ECB into a more dramatic stimulus boost at tomorrow’s governing council meeting, says Jasper Lawler of CMC Markets:

He believes Mario Draghi could announce plans to buy more assets with newly printed money each month, rather than just run the quantitative easing programme for longer.

The euro plunged after data showed Eurozone inflation was stuck at a meagre 0.1% year-over-year in November, missing estimates of a slight rise to 0.2%.

The inflation miss adds to the case for stronger action from the ECB tomorrow. The data could be the difference-maker for the ECB choosing to increase the size of monthly asset purchases over just extending the end-date of the QE program.

Currently the ECB is buying €60bn of assets each month with new money, to expand its balance sheet and push more cash into the economy.

Updated

The euro has fallen sharply, as investors calculate that the ECB is very likely to announce new stimulus measures tomorrow:

Eurozone inflation: the detail

Eurozone’s inflation rate was, once again, pegged back by cheaper oil and petrol.

Here’s the detail, explaining why inflation was just 0.1% last month.

  • Energy prices slumped by 7.3%
  • Food: up 1.5%
  • Service: up 1.1%
  • Other goods: +0.5%
Eurozone inflation

Eurozone inflation, November 2015 Photograph: Eurostat

Another blow – core inflation, which excludes energy, food and tobacco, only rose by 0.9%.

That’s down from 1.1% a month ago, suggesting that inflationary pressure in the eurozone is actually weakening….

Eurozone inflation stuck at 0.1%

Here comes the eagerly-awaited eurozone inflation data!

And it shows that consumer prices only rose by 0.1% year-on-year in November.

That’s a little weaker than the 0.2% which economists had expected.

It raises the chances of significant new stimulus moves from the European Central Bank tomorrow (as explained earlier in this blog)

More to follow….

Updated

The pound has been knocked by the news that UK construction growth has hit a seven-month low:

Pound vs dollar today

Pound vs dollar today Photograph: Thomson Reuters

Updated

Britain’s construction sector is suffering from a lack of skilled builders, warns David Noble, CEO at the Chartered Institute of Procurement & Supply.

He says this is a key factor behind the sharp drop in growth last month:

“Suppliers continued to struggle this month, citing shortages in key materials, supply chain capacity and skilled capability as the causes.

But there is a question mark over the coming months as the housing sector, normally the star performer, may drag back on recovery along with the lack of availability of skilled staff.”

Maybe George Osborne should get back to that building site….

Britain’s Chancellor of the Exchequer George Osborne lays a brick during a visit to a housing development in South Ockendon in Essex, Britain November 26, 2015. REUTERS/Carl Court/Pool

Construction recovery is ‘down but not out’

The slowdown in housebuilding growth last month means that it was overtaken by the commercial building sector, as this chart shows:

Construction PMI by sector

Tim Moore, senior economist at Markit, explains:

“The UK construction recovery is down but not out, according to November’s survey data. Aside from a pre-election growth slowdown in April, the latest expansion of construction activity was the weakest for almost two-and-a-half years amid a sharp loss of housebuilding momentum.

“Residential activity lost its position as the best performing sub-category, but a supportive policy backdrop should help prevent longer-term malaise. Strong growth of commercial construction was maintained in November as positive UK economic conditions acted as a boost to new projects, while civil engineering remained the weakest performer.

UK construction growth hits seven-month low

Breaking — growth across Britain’s construction sector has slowed to a seven month low, as builders suffer an unexpected slowdown.

Data firm Markit reports that house building activity expanded at the lowest rate since June 2013 in November.

Markit’s Construction PMI, which measures activity across the sector, fell to 55.3 last month from 58.8 in October.

That is the weakest reading since the pre-election slowdown in April, and the second-weakest since mid 2013.

The slowdown was particularly sharp in the house-building area – which is particularly worrying, given Britain’s desperate need for more homes.

Markit says:

All three broad areas of construction activity experienced a slowdown in output growth during November. Residential building activity increased at the weakest pace since June 2013, while civil engineering activity rose at the slowest rate for six months and was the worst performing sub- category.

UK construction PMI

More to follow…

Yannis Stournaras governor of Bank of Greece shows the new 20 euro note in Athens, Tuesday, Nov. 24, 2015. The new 20 euro notes will circulate in the 19 Eurozone countries on Wednesday. Greece was formally cleared Monday to get the next batch of bailout loans due from its third financial rescue after the cash-strapped country implemented a series of economic reform measures that European creditors had demanded. (AP Photo/Thanassis Stavrakis)

A new survey of Europe’s businesses has found that, for the first time since 2009, they aren’t struggling to get credit.

That suggests the ECB’s policy measures are having an effect — and also indicates that perhaps more stimulus isn’t needed after all….

The ECB surveyed more than 11,000 companies across the eurozone. And most reported that they have no concerns over their ability to borrow. Instead, the main problem is a lack of customers.

It’s six weeks since the last ECB meeting, when Mario Draghi dropped a loud hint that the central bank was ready to do more stimulus if needed.

Since then, European stock markets have climbed steadily, and are heading for a three-month high today.

Latvia’s central bank governor has apparently told a local newspaper that the ECB’s quantitative easing programme is “better than doing nothing”.

That’s via Bloomberg. The interview took place with the Neatkariga Rita Avize newspaper – but there’s only a teaser online.

There’s a bit of edginess in the markets this morning, as investors wait for November’s eurozone inflation data to arrive in 70 minutes time.

Economists expect a small uptick, from 0.1% to 0.2% — while core inflation (which strips out volatile factors like energy and food) might hover around 1.1%.

A poor reading would surely seal fresh stimulus measure at tomorrow’s ECB meeting. But a stronger inflation report might cause jitters, as Conner Campbell of Spreadex puts it:

Given that the region’s failure to reach its inflation targets is one of the main reasons the Eurozone’s central bank is considering another injection of QE, this Wednesday’s figures perhaps carry slightly more weight than they have of late.

European stock markets

European stock markets in early trading Photograph: Thomson Reuters

This chart shows how investors expect the ECB to impose deeper negative interest rates on commercial banks.

That would discourage them from leaving money in its vaults rather than lending it to consumers and businesses:

Ramin Nakisa of UBS

Ramin Nakisa of UBS Photograph: Bloomberg TV

It’s possible that the European Central Bank disappoints the markets tomorrow.

Ramin Nakisa, global asset allocation manager at UBS, believes the ECB will not boost its quantitative easing programme tomorrow, despite a general belief that more QE is coming.

He also reckons the deposit rate paid by banks who leave cash at the ECB will only be cut by 10 basis points, from minus 0.2% to minus 0.3%.

Nakisa tells Bloomberg TV:

If that happens, there could be some disappointment in the markets.

But in the long-term, Nakisa adds, the eurozone economy is recovering. More stimulus isn’t really needed.

Ding ding – European markets are open for trading, and shares are rising.

The German DAX, French CAC, Italian FTSE MIB and Spanish IBEX are all up around 0.4%, ahead of tomorrow’s ECB meeting.

The FTSE 100 is lagging, though – up just 0.1%. It’s being dragged down by Saga, the travel and insurance group, which has shed 5% after its biggest shareholder sold a 13% stake.

The Bank of England printing works, now De La Rue, in Debden Newly printed sheets of 5 notes are checked for printing mistakes<br />B81HM8 The Bank of England printing works, now De La Rue, in Debden Newly printed sheets of 5 notes are checked for printing mistakes

You’d think that printing banknotes would be a safely lucrative business (losing money? Just make some more!).

But De La Rue, the UK-based printer, has just announced that it’s cutting around 300 staff and halving its production lines from eight to four.

The axe is falling sharply on its Malta plant, which is to close.

De La Rue prints more than 150 national currencies, and has suffered from falling demand for paper notes. There had been chatter that it might pick up the contract to produce new drachma for Greece, but that particular opportunity appears to have gone…..

Updated

VW shareholders to face workers

There could be ructions in Wolfsberg his morning, as the billionaire owners of Volkswagen face workers for the first time since the emissions cheating scandal broke.

The Porsche-Piech have been criticised for keeping a low profile since the VW crisis erupted. But today, several members of the group will make the trip to the carmakers headquarters to show solidarity with workers – who are being forced to down tools over Christmas because sales have weakened.

Bloomberg has a good take:

Wolfgang Porsche, chairman of family-owned majority shareholder Porsche Automobil Holding SE, will address thousands of workers in hall 11 of Volkswagen’s huge factory in Wolfsburg, Germany. He’ll be flanked at the 9:30 a.m. staff meeting by the other three supervisory board members who represent the reclusive clan: Louise Kiesling, Hans-Michel Piech and Ferdinand Oliver Porsche.

The Porsche-Piech family has been asked by labor leaders to signal their commitment to workers, now facing two weeks of forced leave during the Christmas holidays as the crisis begins to affect sales.

Labor chief Bernd Osterloh, who has pushed to shield workers by focusing cutbacks on Volkswagen’s model portfolio, will host the assembly. It comes amid mixed news for Volkswagen: though the company has made progress toward a simpler-than-expected recall of 8.5 million rigged diesel cars in Europe, plummeting U.S. sales show the impact of the crisis on the showroom floor.

Updated

The Agenda: Eurozone inflation could seal stimulus move

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

There’s a ‘calm before the storm’ feeling in the markets today. Investors are bracing for Thursday’s European Central Bank meeting, where it is widely expected to boost its stimulus programme.

European stock markets are tipped to rally at the open, on anticipation that Mario Draghi will step up to the plate again and announce something significant.

It could be a new cut to borrowing costs, hitting banks with harsher negative interest rates to force them to lend money. Or it could be an extension to the ECB’s QE programme – a commitment to pump even more new electronic money into the economy.

Or both.

Or something else entirely. With ‘Super Mario’, you never know for sure.

The ECB is under pressure to act, because inflation in the eurozone is so weak.

At 10am GMT, the latest eurozone prices data is released — it’s expected to show that prices rose by just 0.2% annually in November. That would be an improvement on October’s 0.1%, but still far short of the target (just below 2%).

Also coming up today….

  • Market releases its UK construction PMI report at 9.30am GMT. That will show how the building industry fared last month -
  • The latest measure of US private sector employment is released at 1.30pm GMT. That will give a clue to how many jobs were created across America last month, ahead of Friday’s non-farm payroll report.
  • Federal Reserve chair Janet Yellen is speaking at the Economics Club of Washington on Wednesday at 5:25pm GMT.
  • And Canada’s central bank sets interest rates at 3pm GMT – we’re expecting no change.

We’ll be tracking all the main events through the day….

Updated

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Analysts say 0.6% drop in October shows consumers are taking a breather before festive season. But high street outlook remains healthy as figures for the last three months showed growth for the 23rd consecutive month, increasing by 0.9%…

Powered by Guardian.co.ukThis article titled “UK retail sales fall hints at pre-Christmas lull” was written by Phillip Inman, economics correspondent, for theguardian.com on Thursday 19th November 2015 11.08 UTC

Retail sales slumped in October despite shops slashing prices to entice bargain hunters.

The Office for National Statistics said on Thursday the quantity of goods bought dropped by 0.6% on the previous month, slightly more than analysts had expected.

However, there was a City consensus that consumers were “taking a breather” before the festive shopping season, and the underlying situation was still one of healthy growth.

The ONS emphasised the point with figures for the last three months on the previous quarter that showed growth for the 23rd consecutive month, increasing by 0.9%. Sales volumes were running 3.8% higher than a year ago, it said.

Over the past year, food and fuel have taken the biggest toll on sales after a 3.6% decline in fuel sales and a 1.5% fall in food.

Household goods stores reported a 3.1% rise in sales from October last year, but only after a 2.3% cut in prices. Clothing recorded a 2.3% rise in sales over the same period after prices were kept flat.

Graph showing UK quarterly retail sales

Rolling quarter on quarter of all retailing, seasonally adjusted, January 2010 to October 2015 Photograph: ONS

Chris Williamson, chief economist at the financial data provider Markit, said: “The decline needs to be looked at in light of the 1.7% sales surge seen in September, leaving the three months growth rate – a good indicator of the underlying sales trend – showing a healthy 0.9% rate of increase.

“Further spending growth is likely in the coming months, for the short-term at least. The longer-term outlook is more uncertain, being dependent on trends in inflation, wages and interest rates.”

The prospect of millions of households receiving letters in a month informing them of tax credit cuts may also play a part in dampening consumer demand going into the new year.

Jeremy Cook, chief economist at the currency dealer World First, said: “Retail sales in October are always a strange one – unable to benefit from the ‘back to school’ rush and unlikely to see too many Christmas shoppers and hence can see a slight slip in expenditure.

“This year is no different, given September’s number was boosted by strong spending around the Rugby World Cup and warm weather, and we have seen a natural pause on the nation’s high streets before the manic festive season begins.”

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Disappointment as Germany, France and Italy only post modest growth, while Portugal stagnates and Finland continues to slow. Eurozone GDP misses expectations. France returns to growth, but analysts aren’t impressed. Germany hit by global problems…

Powered by Guardian.co.ukThis article titled “Eurozone GDP: Growth slows to just 0.3% – as it happened” was written by Graeme Wearden, for theguardian.com on Friday 13th November 2015 13.42 UTC

Closing summary: Weak eurozone growth puts pressure on ECB

Rather like April Fool’s Day, eurozone GDP day is best enjoyed before lunchtime. So here’s a summary:

Europe’s economic recovery has faltered, with growth in the single currency region slowing to just 0.3% in the third quarter of the year.

Weak international trade helped to drag back Germany and Italy, and limited France’s recovery too.

Only consumer spending came to Europe’s aid, with household expenditure providing much of the growth impetus.

The subdued performance raises the pressure on the European Central Bank to boost its stimulus programmes at its December meeting.

Nick Kounis, head of macro and financial markets research at ABN AMRO bank, called it the “final push” for the ECB to be decisive.

The day began with France returning to growth, with GDP up by 0.3%.

Finance minister Michel Sapin told AFP that France’s economy will grow “by at least 1.1 percent” for 2015 as a whole, adding he believed the country had “exited the period of extremely weak growth that had lasted too long”.

But analysts were less impressed, pointing out that France’s ran a large trade deficit during the quarter. Only stockpiling by companies prevented the economy shrinking.

Germany’s economy also grew by 0.3%, down from 0.4%. The economy ministry blamed weak trade; economists warned that emerging market slowdown is hurting.

Smaller nations didn’t fare well either, with Italy slowing to +0.2%, the Netherlands barely growing, and Portugal actually stagnating.

But Finland was the real shocker — living up to its reputation as the ‘sick man of Europe’ with a 0.6% contraction.

Finland GDP

Only Greece beat expectations – shrinking by a mere 0.5%, not the 1% expected. That tells you something about the accuracy of City forecasts, and the turmoil in the Greek economy this year. When a 0.5% contraction is ‘good news’, you know you’re been through the mire.

But it may mean that Greece’s economy ‘only’ stagnates during 2015.

That’s probably all for today. I’m off to fold up the Eurozone GDP Day banners, and finish up the party punch.

Thanks for reading and commenting; see you next week. GW

A double helping of halušky to Slovakia, which was the fastest-growing member of the eurozone in the last quarter.

But it’s cold potatoes for Finland, which posted the worst performance – even worse than a Greek economy gripped by capital controls:

Eurozone GDP chart

Eurozone GDP chart

Updated

Here’s our news story on today’s GDP figures (to save new readers scrolling back to 6.15am onwards):

The eurozone’s economy lost steam in the latest quarter as Portugal stalled, Germany slowed and debt-stricken Greece contracted.

Gross domestic product (GDP) across the 19 countries in the single currency bloc rose just 0.3% in the third quarter, according to Eurostat. That defied expectations for growth to hold at 0.4%, according to a Reuters poll of economists. On a year earlier, GDP was up 1.6%, lower than forecasts for 1.7%.

The July to September figures mark a slowdown from eurozone GDP growth of 0.4% in the second quarter and 0.5% in the first quarter and come as the European Central Bank (ECB) hints that it is planning to inject further funds into the eurozone economy to maintain recovery…..

Updated

Eurozone markets hit by GDP disappointment

European stock markets have been hit by the news that growth slowed across the eurozone in the last quarter.

The main indices are all in the red, adding to yesterday’s selloff:

European stock markets, November 13 2015

Conner Campbell of SpreadEX says the mood darkened as this morning’s data emerged.

Joining a decent French figure and sliding Germany growth were misses by Italy and the Netherlands. Even worse were the performances from Portugal and Finland; the former, so often pointed to as one of the region’s post-crisis success stories, saw no growth at all in the third quarter, whilst the latter, increasingly becoming one of the Eurozone’s most rotten appendages, actually saw its GDP contract by 0.6%.

Given region’s general malaise, the Eurozone as a whole was arguably lucky only to see a 0.1% decline quarter-on-quarter, with its Q3 figure coming in at a forecast-missing 0.3%. Understandably investors weren’t too pleased with these results, meaning even the spectre of more ECB QE (the likelihood of which only increased with this morning’s figures) couldn’t drag the DAX and CAC out of the red.

This chart shows how Italy, Portugal and the Netherlands all missed expectations this morning, dragging the eurozone growth rate down (via Bloomberg)

Eurozone GDP

Updated

At just 0.3%, the eurozone economy isn’t growing fast enough to pull unemployment down and drive demand, as Bloomberg economist Maxime Sbaihi explains:

The weakness of the eurozone recovery adds “to the already strong case for the ECB to step up monetary stimulus in December,” says Nick Kounis, head of macro research at ABN Amro Bank.

Kounis added that while Europe’s domestic economy is doing well, it is suffering from weak world trade and deteriorating export markets.

Cyprus has posted another quarter of growth, as its recovery from its 2013 bailout trauma continues.

Cypriot GDP rose by 0.5% in July-to-September, matching the growth in April-June.

That means Cyprus’s economy is now 2.2% larger than a year ago.

The eurozone’s recovery has “ disappointingly lost momentum for a second successive quarter”, says Howard Archer of IHS Global Insight.

The third-quarter slowdown in Eurozone GDP growth appears to have been largely the consequence of negative net trade (this was certainly true of Germany, France and Italy).

This suggests that the benefit to Eurozone exporters coming from the weak euro was offset by muted global growth. Meanwhile, relatively decent Eurozone domestic demand supported imports.

This chart shows how Greece’s economy went into reverse in the last quarter:

Greek GDP

Greek economy shrinks

Oxi Day celebrations, Athens, Greece - 28 Oct 2015<br />Mandatory Credit: Photo by Kostas Pikoulas/Pacific Pres/REX Shutterstock (5320493d) A Greek flag waves during the parade Oxi Day celebrations, Athens, Greece - 28 Oct 2015 Students parade celebrating the ‘’Oxi Day’’ during the 75th anniversary of Greece’s entering WWII, after denying the Italian ultimatum to enter Greek soil in 28th October 1940.

Today’s figures also show that Greece’s faltering recovery has been wiped out in the last three months.

Greek GDP contracted by 0.5% in the July-September quarter, Eurostat says, having risen by 0.4% in April-June.

That’s not a surprise, given the bailout drama this summer which saw banks shuttered and capital controls imposed.

And it’s actually less awful than feared — economists had forecast a 1% contraction:

Updated

Eurozone growth slows to 0.3%

Breaking: The eurozone economy grew by just 0.3% in the third quarter of the year.

That’s a slowdown on the 0.4% recorded three months earlier, showing that Europe’s recovery remains fragile and lacklustre despite the huge stimulus measures launched by the European Central Bank this year.

It’s also weaker than expected — economists had expected 0.4% growth.

Updated

Brussels officials have pointed to Portugal as an example that tough fiscal consolidation can deliver results. Today’s disappointing (no) growth figures may prompt a rethink….

Portugal’s economy stagnates

The national Portuguese flag is hoisted next to the Euro 2004 flag<br />epa000207050 The national Portuguese flag is hoisted next to the Euro 2004 flag as the England soccer squad arrives in Lisbon on Monday, 07 June 2004, for the Euro 2004 European soccer Championships. England will play their opening first round match against France on Sunday. EPA/JOAO RELVAS

More gloom. Portugal’s recovery ran out of steam in the last quarter, just as its political crisis escalates.

GDP was flat in the July-September quarter, after growing by 0.5% in the second quarter.

That’s much weaker than the 0.4% economists had expected, and looks like the weakest quarter in 18 months.

The Portuguese Stats Office says:

Comparing with the second quarter, GDP registered a null change rate in real terms in the third quarter (0.5% in the second quarter).

The contribution of domestic demand was negative, mainly due to the reduction of Investment, while net external demand contributed positively, with Imports of Goods and Services decreasing more intensely than Exports of Goods and Services.

On an annual basis, Portuguese GDP grew by 1.4%, down from 1.6% three month ago.

Portuguese GDP

This comes as Portugal’s left-wing parties vow to overturn its austerity programmes and implement more growth-friendly measures, having overturned its centre-right government this week.

Updated

We now have to wait until 10am GMT for the official eurozone-wide GDP reading for July-September.

But it’s already clear that this wasn’t a great quarter for Europe, with a weak trade performance dragging back the three largest eurozone economies.

Economist Fred Ducrozet reckons eurozone growth will fall short of the 0.4% expected, to 0.3%.

While City firm Abshire-Smith reckons the European Central Bank is under even more pressure to ease monetary policy:

Updated

Italy growth slows

Here comes Italy’s GDP report….and it’s weaker than hoped.

The Italian economy grew by just 0.2% in the third quarter of 2015, dashing expectations of a 0.3% expansion.

It suggests Italy’s recovery is running out of steam.

GDP rose by 0.4% in the first quarter of 2015, dipping to 0.3% in the second quarter – and now just 0.2% in Q3.

Finland’s economy has now been locked in a painful downturn for the last three years, as this chart from Statistics Finland shows:

Finnish GDP

That’s via fastFT, which warns:

Finland is used to cold, dark winters, and the experience could stand it in good stead as the Nordic country’s bitter economic cold snap shows no sign of a thaw.

Netherlands grows by just 0.1%

The Dutch flag flies outside the ING head office in Amsterdam, Netherlands, Monday Oct. 20, 2008.

Next up, the Netherlands…. and its economy struggled to grow in the last quarter.

GDP rose by just 0.1% in the July-September quarter, a very modest performance.

And second-quarter GDP has been revised down, to just +0.1% from +0.2% originally.

That left the economy 1.9% larger than a year ago, weaker than forecast.

Updated

‘Sick man’ Finland’s economy shrinks by 0.6%

Scandinavian Flags<br />ca. 1990s, Helsinki, Finland --- Scandinavian Flags --- Image by Joel W. Rogers/CORBIS

Finland has cemented its growing reputation as one of Europe’s most ailing members.

Finnish GDP contracted by 0.6% in the last quarter, according to new data this morning. That left Finland’s economy 0.8% smaller than a year ago.

The fall in natural resource prices, the demise of Nokia, and the knock-on impact of Russia’s economic problems are all hurting.

Having been one of the cheeleaders for eurozone austerity, Finland now finds itself in a very tough position. It is trying to cut spending to keep its deficit within the limits set by Brussels, which is hurting attempts to return to growth.

Two months ago, finance minister Alex Stubb admitted “we are the sick man of Europe.” Today’s figures don’t challenge that diagnosis.

Slovakia has outpaced its larger neighbours to the west, with growth of 0.9% in the last three months. That’s up from 0.8% in the second quarter.

The Czech Republic has beaten expectations, with growth of 0.5% in the last quarter.

City analysts have been chewing through France’s GDP figures, and they’re not too impressed.

RBC is concerned that inventory-building by companies provided much of the growth:

While Barclays says France’s economy is still vulnerable.

More data. Hungary has missed forecasts by posting annual growth of 2.3% in the last quarter, down from 2.7% three months earlier.

On a quarter-on-quarter basis, Hungary (which isn’t in the eurozone) grew by 0.5%.

Germany’s economy would be in a worse state if consumers weren’t benefiting from cheaper energy costs, points out Holger Sandte of Nordea Markets.

This morning’s figures show that Britain has outpaced its two largest European rivals in the last quarter.

UK GDP grew by 0.5% between July and September, data released last month showed.

That’s obviously better than France and Germany, and also beats America (which grew by around 0.4% in Q3).

Germany’s Statistics Office says that domestic spending was a key driver of growth, while overseas demand for German exports lagged behind:

“Private and public consumption both increased.”

“According to preliminary estimates, growth was held back by foreign trade because imports rose far more strongly than exports.”

Germany’s economy has been dented by problems overseas, says Carsten Brzeski of ING.

Here’s his quick take on today’s growth figures:

The summer weakness of the German industry seems to be more substantial than only a vacation-driven soft spell. The turmoil in emerging markets and the Chinese slowdown have finally left some marks on the German economy.

More generally, the German industry has not managed to accelerate and shift up one gear. Somehow, the weak euro and extremely favourable financing conditions have not fully deployed their full impact on the industry, yet. This is partly the result of weakening external demand but also still the structural lack of investment incentives and projects.

Consumer spending, though, is still strong. More here.

Updated

This German GDP report “isn’t overwhelming”, says Bloomberg’s Hans Nichols, but at least the its economy is still growing.

The slight slowdown in the last quarter suggests Germany has been hit by problems in emerging markets such as China.

And as these charts show, 2015 hasn’t been a vintage year for the German economy

German GDP

german Photograph: Bloomberg
german GDP

The German GDP report is online here.

Germany posts 0.3% growth

German chancellor Merkel visits China<br />30 Oct 2015, Hefei, Anhui Province, China --- German Chancellor Angela Merkel looks on under a German and a Chinese national flag as she visits the German Academy at the University of Hefei in Hefei, China, 30 October 2015. Merkel is on a two-day official visit to China. Photo: Soeren Stache/dpa --- Image by © Soeren Stache/dpa/Corbis

Here comes Germany’s GDP data…. and it shows that Europe’s largest economy grew by 0.3% in the last quarter.

That matches France’s performance, and is a slightly slowdown on the 0.4% recorded in April-June.

Germany’s stats office says that consumer and government spending both rose.

Trade had a negative impact on growth, though, with imports growing faster than exports….

Updated

French finance minister Michel Sapin has welcomed today’s GDP data.

He told AFP newswires that France has escaped a long period of very low growth.

Some reaction to the French GDP report:

French GDP: The details

France’s return to growth was driven by household spending (up 0.3%) and business investment (up 0.7%).

But the trade picture is quite ugly. Exports fell by 0.6%, while imports grew by 1.7%.

So net trade actually knocked 0.7% off GDP, but this was compensated by firms bolstering their inventories.

Without that, the figures look worse.

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The French GDP report is online here.

Updated

Bloomberg TV flags up that the French economy has generally been sluggish over the few quarters, apart from a healthy bounce at the start of this year:

French quarterly GDP

French GDP over the last five quarters Photograph: Bloomberg

France’s economy is now 1.2% larger than a year ago, slightly better than the 1.1% annual growth economists expected.

French economy growing again – GDP up 0.3%

Close-up of French flag<br />A63GGC Close-up of French flag

France has got eurozone GDP day up and running by returning to growth.

French GDP increased by 0.3% in the last quarter, the INSEE stats office reports.

That follows zero growth in the April-June quarter, which fuelled fears that the French economy was stalling.

Updated

Introduction: Eurozone growth figures released

Hang out the bunting and put on the party hats, folks. It’s eurozone GDP day!

We’re about to discover how countries across Europe performed in the third quarter of 2015, from heavyweights like Germany and France to smaller members like Slovakia and Portugal.

Actually, you shouldn’t blow up too many balloons, because we’re probably going to learn that Europe’s recovery remains jammed in second gear.

Economists predict that the eurozone expanded by just 0.4% in the July-to-September quarter. That would match the performance in the second quarter of the year. Better than a recession, but not rapid enough to deal with Europe’s persistent unemployment and debt problems.

EU, eurozone and US growth compared

EU, eurozone and US growth compared Photograph: Eurostat

A poor number today would suggest that Europe has been hit harder than we thought by problems in emerging markets over the summer. It may also show the impact of the Greek bailout crisis on the region.

But anything stronger than 0.4% would be welcome.

The data will also influence whether the European Central Bank feels forced into taking fresh action to stimulate the eurozone economy – a boost to its bond-buying QE programme is already looking likely.

Here’s how the morning should unfold:

  • France: 6.30am GMT / 7.30am CET
  • Germany: 7am GMT / 8am CET
  • Hungary: 8am GMT / 9am CET
  • Romania: 8am GMT / 9am CET
  • Czech Republic: 8am GMT / 9am CET
  • The Netherlands: 8.30am GMT / 9.30am CET
  • Italy: 9am GMT / 10am CET
  • Portugal: 9,30am GMT / 10.30am CET
  • Greece: 10am GMT / 11am CET
  • The eurozone: 10am GMT / 11am CET

Updated

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Martin Beck, senior economic advisor to the EY ITEM Club, agrees that the Bank was more downbeat than expected:

“While we expected a downgrade to the MPC’s growth and inflation forecasts in November’s Inflation Report, the MPC’s latest assessment of the economy struck an unexpectedly dovish tone for interest rates.

“Based on market expectations that the first interest rate rise won’t happen until Q1 2017, the MPC forecast that inflation would only slightly exceed the 2% target by that date. This implies the Committee’s view of the appropriate timing of a rate rise is roughly in line with the market consensus.

Bank of England

Updated

The Institute of Directors has hit out at the Bank of England for playing a “dangerous game” by leaving interest rates so low.

Chief economist James Sproule, who has been calling in vain for a rate hike, says:

“Caution won out again at the Bank of England today, with the Monetary Policy Committee spooked by a worsening outlook for global growth. But, with strong consumer confidence and wages on the up, the arguments against raising interest rates from the current exceptionally low level are falling away.”

Sproule argues that the Bank is storing up trouble; asset prices are being forced up, consumers are putting on more debt, and capital is being misallocated.

And so it begins…

Savers should brace for interest rates to stay at record lows until perhaps 2017, says Maike Currie, associate investment director at Fidelity International.

“Super Thursday has quickly turned into Superfluous Thursday.

It’s now 80 months and counting since the Bank of England has failed to push the button on rising interest rates with its surprisingly dovish stance today….

It leaves investors and retirees facing the ongoing conundrum of finding a home for their money in an environment of low inflation and low interest rates – a backdrop which typically makes for measly returns

Updated

Kallum Pickering of Berenberg Bank has kindly sent a chart, showing how the BoE cut its growth forecasts today:

BoE forecasts

The FT’s Chris Giles reckons Carney attempted a repair job during today’s press conference, which was more hawkish than the actual Inflation Report.

He didn’t row too far – the pound is still down heavily.

Updated

The pound has been thumped against all major currencies since the Bank of England unleashed its unexpectedly dovish inflation report.

That highlights that investors expect rates to remain at record lows for at least another year.

If this was a “Super Thursday” club night*, you’d probably be entitled to a refund.

* – these still exist, right?

Press conference over. Hacks scramble back to base, Mark Carney and colleagues return to protecting the monetary affair of the nation.

I’ll pull some reaction together now.

Carney: We could cut rates (but we didn’t discuss it)

Business Insider’s Mike Bird asks Carney about the possibility that UK interest rates could be lowered from 0.5%.

He cites recent comments from ECB chief Mario Draghi on this issue of zero interest-rate policy, suggesting that borrowing costs could go lower than previously thought.

Carney replies that the MPC did not consider easing monetary policy today.

But it could potentially lower borrowing costs if needed.

Reuters snapped the key points:

  • BANK OF ENGLAND’S CARNEY – IF WE EVER NEEDED TO, WE COULD CUT RATES BELOW CURRENT LEVEL
  • BANK OF ENGLAND’S CARNEY – FACT WE ARE NOT AT ZERO LOWER BOUND WEAKENS ARGUMENT FOR NOT RAISING INTEREST RATES

That seems to have knocked the pound, it’s down 1.5 cents or 1% at $1.5230.

Mind you, that could be the impact of Mike’s wardrobe….

Q: What discussions has the BoE had with other central banks about the possibility that monetary policy diverges next year, with the UK and US may raising rates while the eurozone and Japan could get more stimulus?

It feels like we meet almost continually, says Carney wearily. We’ll be meeting again next week in Basel.

We don’t sit there saying ‘here’s what I told that press conference but here’s what we really think’, he promises

And he also insists that monetary policy isn’t secretly agreed in advance:

There is no major central bank that knows what it is going to do at its next meeting.

They all have frameworks and objectives, and the factors that influence its decisions.

And in all Carney’s years as a G7 central bank governor in Canada and the UK, this has only changed once:

The only time that was different was the depth of 2008, when we agreed to do certain things.

That was the wild days of October 2008, when the world banks announced co-ordinated rate cuts to try to calm the global panic.

Updated

Yield curves (which show investors’ expectations of rate hikes) have not matched up to the Bank’s own forecasts. So how worried is the governor that he’s losing credibility in the markets?

Carney insists that he’s “not at all” concerned about this. One can read too much into market yield curves.

Q: Some of this summer’s market mayhem was caused by speculation that US interest rates might rise soon, so are central banks making the situation worse?

Deputy governor Minouche Shafik agrees that there was significant volatility this summer – with the VIX index (which measures this) hitting its highest level since 2011.

But volatility has dropped back since, suggesting the markets are operating as they should.

We’re returning to how things were before the Great Moderation, Shafik adds.

Our Katie Allen asks Carney about the Bank’s belief that the UK economy is ‘resilient’ despite the government’s fiscal consolidation (George Osborne’s ongoing attempts to eliminate the deficit).

Q: Should we expect major changes to these forecasts in February, once we’ve seen the Autumn Statement?

We have incorporated the current fiscal plans into our forecasts, Carney says. We’ll make adjustment if the government’s fiscal stance changes but we won’t react to rumour.

And he notes that this fiscal consolidation is “material”, and has had a significant impact on the UK economy.

Updated

What are households expect to make of things?

Many people expect rates to go up in the next year, Carney replies, and that’s a “reasonable” idea.

Governor Carney isn’t spoiling us with too many straight answers.

Here’s the proof that the markets have been consistently wrong about UK interest rates going up:

Chris Giles of the Financial Times points out that house price inflation is running at 9% (according to the Halifax).

So, does the Bank need to unleash some macro-prudential tools to cool the housing market while it leaves rates so low?

Mark Carney agrees that the housing market appears to be picking up, and unsecured credit is growing too.

We do have to think about the balance in the recovery, and the potential implication of the continuation of those development…And that does bring into scope some macro-prudential issues.

That sounds like a YES.

So what might it mean? In theory, the Bank could impose tougher lending rules on banks and building societies to cool the market.

Updated

Q: The Federal Reserve says it could raise interest rates in December; Could the Bank of England say the same about the first half of 2016?

Mark Carney won’t be lured into any predictions.

We take a decision each month, based on many factors, and we are committed to getting inflation back to target, he says.

Sky News Ed Conway’s asks whether we should even bother looking at market expectations for bank rate (a key part of today’s inflation report).

Five years ago, market expected rates to be 3.75% today. A year ago, they expected 1%, so should we stop paying attention?

Carney says that the Bank doesn’t endorse these expectations.

Ed squeezes in a second question – is there something ‘chronic’ wrong with the UK economy that means rates are still so low, or have we just suffered a series of unfortunate events?

Ben Broadbent, deputy governor, responds, points out that the equilibrium inflation rate has been falling for many years, even before the financial crisis.

“There are deep global forces that were at work here – including demographics”

Therefore the level of official interest rates aren’t an arbitrary choice. – we are responding to the situation.

Our ambition is to return ‘sustainably’ to the inflation target, Carney says, rather than blunder by trying to fight the ‘persistent’ factors keeping prices low.

Updated

Carney: No regrets over rate predictions

Robert Peston has the microphone, and uses it like a laser beam to target Carney’s credibility.

Q: Do you regret telling the public that the decision over UK interest rates will come into ‘sharper relief’ at the turn of the year?

Absolutely not, Carney replies.

Growth has ticked down in recent months, but domestic conditions have evolved rather as the Bank expected. “Foreign effect” are to blame for weak inflation expectations.

We have a situation where there is mixed progress, but there is progress…. towards monetary normalisation.

Updated

Onto questions:

Q: Not much appears to have changed in today’s Inflation Report, but there’s a big reaction in the markets. Why?

Mark Carney says there have been some important changes since early August (the last meeting).

Firstly: Demand for risk-free assets has risen, and there’s been “a sharp selloff in risk assets”.

Bank funding costs are up, credit spreads are up, equity markets have fallen. There’s been “a big unwind”.

Secondly: concerns over the emerging markets has risen.

Now this is interesting. Carney says that the Bank expects to keep its stock of UK government bonds until interest rates have reached a level where they can be cut.

That means the BoE won’t be unwinding QE until rates have hit 2%.

There are a range of views among the monetary policy committee over the balance of risks to inflation, says Carney.

Mark Carney confirms that UK inflation is expected to remain below 1% until the second half of 2016, citing factors such as cheaper commodity prices and other imported goods prices.

Carney at Bank press conference
Carney at press conference Photograph: Bloomberg TV

Carney warns of global risks

“Remember, remember the 5th of November” grins Mark Carney as the press conference begins (maybe he’ll hand out some toffee apples later #hint)

So what’s memorable about today? There are some familiar themes – inflation remains low, rates remain unchanged, and it’s another 8-1 split.

But there are some subtle but significant shifts in the picture since August.

Global developments are the biggest change in the last three months; these post a downside risk to the UK economy.

But the UK economy is more encouraging, he adds.

Domestic momentum remains resilient, as does consumer confidence, while firms still have robust inflation intentions.

Updated

Bank of England Press Conference begins

The Bank of England press conference is starting now – you can watch it live here.

ITV’s Robert Peston is preparing to give Carney a grilling

The story: BoE signals rates will stay at 0.5% for a while

Here’s Katie Allen’s story on the Bank of England rate decision:

The Bank of England has sent a reassuring message to businesses and households that interest rates are to remain at their record low well into next year as it cut its forecast for near-term inflation.

The central bank signalled in its latest Inflation Report that interest rates would need to rise at some point from the current 0.5%, but it gave no indication a move was imminent and reiterated that when borrowing costs do go up, they will do so only gradually.

Rates have been at 0.5% since the depths of the global financial crisis more than six years ago. Minutes from the Bank’s latest rate-setting meeting, published alongside the report, showed that only one of the nine monetary policy committee members felt it was now time to start hiking. Ian McCafferty dissented from the rest of the MPC, as he has done in recent months, based on risks that inflation would start to pick up.

The Bank’s quarterly outlook said that based on recent falls in oil and other commodity prices, “inflation is likely to remain lower than previously expected until late 2017” and return to the government-set target of 2% in around two years’ time, then rise above it. The latest official figures put inflation at -0.1%.

The report also flagged a weaker outlook for global growth than at the time of its last forecasts in August and the MPC downgraded the prospects for emerging market economies. Such an outlook would continue to influence the UK economy and the path of interest rates.

Here’s the full story:

The Bank also flags up that market expectations of future interest rate rises have fallen since August:

It says:

Short-term interest rates in the United Kingdom, United States and euro area were lower in the run-up to the November Report than three months earlier.

While some of those falls may reflect lower expectations of the most likely path for policy, given the weaker outlook for global growth and inflation, some could also reflect increased perceptions of downside risks.

Bank of England inflation report

Updated

This chart explains why the Bank of England is worried about emerging markets:

Bank of England quarterly inflation report

The Bank’s new quarterly inflation report is online here (as a pdf).

It is packed with interesting charts.

These two show that the UK economy will take a serious hit if China suffers a hard landing.A 3% drop in Chinese growth wipes 0.3% off UK GDP.

Bank of England quarterly inflation report
Bank of England quarterly inflation report

The Bank says:

As in August, Chinese growth is projected to continue to moderate gently in the near term. But recent financial market developments have highlighted the challenges faced by the authorities in maintaining growth while both liberalising and rebalancing the Chinese economy…..

A sharp slowing in China could affect the UK economy.

Updated

Carney also told Osborne that inflation should start to pick up, from zero, in early 2016:

The Bank has also released a letter from governor Carney to chancellor George Osborne, explaining why he hasn’t managed to keep inflation on target.

He blames international factors such as cheaper oil and metals, the strength of sterling (pushing down the cost of imports) and limited earnings growth (although real wages are finally rising).

This chart of inflation forecasts shows exactly why the Bank isn’t rushing to raise borrowing costs:

The key message from the Bank is that the UK still needs record low borrowing costs to ward off the global downturn:

Peter Hemington, partner at accountancy firm BDO LLP, says the Bank of England made the right decision, given signs that UK growth is weakening amid a global slowdown.

“With rates so low, policymakers must act to insulate the UK economy from the increasingly gloomy global economic outlook. So far our recovery has largely been based on consumer spending, but we need business and public sector investment if we are to rebalance the economy, boost productivity and make sure that companies thrive across the country.

This will put the economy on the firmest possible footing for the potentially shaky months ahead.”

The Bank also reminds us that when (but when?!) Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles.

The Bank of England remains fairly optimistic about the domestic UK economy.

The minutes say:

Domestic momentum remains resilient. Consumer confidence is firm, real income growth this year is expected to be the strongest since the crisis, and investment intentions remain robust. As a result, domestic demand growth has been solid despite the fiscal consolidation….

Robust private domestic demand is expected to produce sufficient momentum to eliminate the margin of spare capacity over the next year.

But with few inflationary pressures, and worries over the global economy, eight members of the committee voted to leave interest rates at 0.5%.

Updated

Pound hit by dovish Bank of England

DOWN GOES THE POUND.

Sterling is tumbling like a wounded hawk, as traders scramble to react to the Bank’s downgraded forecasts.

Sterling was trading at $1.5391 before the news broke, and it’s now dropped to $1.5312.

The Bank has also cut its inflation forecasts.

It now expects the Consumer Prices Index to remain below 1% until the second half of 2016, far from the official target of 2%.

BoE cuts growth forecasts on emerging market gloom

The Bank of England has also cut its forecasts for economic growth in 2015 and 2016.

In a gloomy statement, it reveals that it is less optimistic about the UK economy.

The outlook for global growth has weakened since the August Inflation Report. Many emerging market economies have slowed markedly and the Committee has downgraded its assessment of their medium-term growth prospects.

And the Bank also fears trouble in emerging markets:

While growth in advanced economies has continued and broadened, the Committee nonetheless expects the overall pace of UK-weighted global growth to be more modest than had been expected in August. There remain downside risks to this outlook, including that of a more abrupt slowdown in emerging economies.

The BoE also voted 9-0 to leave its quantitative easing programme unchanged, meaning it will still hold £375bn of UK gilts.

Ian McCafferty was the only MPC policy maker to vote to hike to 0.75% again.

That has dashed speculation that Kristin Forbes or Martin Weale would join him on the hawks perch.

Updated

Bank of England leaves rates unchanged

BREAKING: The Bank of England has voted 8-1 to leave interest rates unchanged, at the current record low of 0.5%.

Updated

A Bank of England official is phoning the speaking clock right now…. (seriously).

ONE MINUTE TO GO!

Spoiler alert:

Reminder: We get the monetary policy decision at noon, along with the latest quarterly inflation report. Then there’s a 45 minute wait until Mark Carney faces the press pack.

File photo of the logo as seen at the Bank of England in the City of London<br />The logo is seen at the Bank of England in the City of London, Britain in this January 16, 2014 file photo. The Bank of England is expected to make an interest rate decision this week. REUTERS/Luke MacGregor/FilesGLOBAL BUSINESS WEEK AHEAD PACKAGE – SEARCH “BUSINESS WEEK AHEAD OCTOBER 5” FOR ALL 29 IMAGES” width=”1000″ height=”742″ class=”gu-image” /> </figure>
<p><strong>Over at the Bank, they’ll be putting the finishing touches to their announcements — we can expect some rapidfire tweeting once the clock strikes 12.</strong></p>
<p>That’s also the moment that economics correspondents are released from their lock-in. Fleet Street’s finest have been confined in the Bank this morning, getting an early peek at the Inflation Report. </p>
<p>My colleague <strong>Katie Allen</strong> is in Guardian colours….</p>
</p></div>
<p class=Updated

Super Thursday: What to expect

Here are some key points to watch for from the Bank of England today:

  1. The timing of a rate rise: Financial markets are pricing in the first rate hike in autumn 2016, but economists believe it will come sooner. Today’s data could force one side to rethink.
  2. The latest economic forecasts: Global inflation and growth look weaker since the Bank’s last big meeting, in August, so we could get downgrades today.
  3. The EU referendum. Is the Bank worried that Britain could vote to leave the EU? How much damage is the Brexit risk already causing?
  4. How the MPC votes. A second policymaker could join Ian McCafferty and vote to raise rates, or the committee could split 8-1 once again
  5. How the pound reacts. A hawkish performance from Mark Carney at the press conference could drive sterling up, which would not please exporters.

Marketwatch’s preview has more details:

5 things to watch for the Bank of England’s Super Thursday

The mood in the City is rather subdued today, as investors wait for the Bank of England to unleash a plethora of announcements and reports at noon.

The FTSE 100 has lost 27 points, under-performing the rest of Europe. It’s been pulled down by the mining sector, and supermarket chain Morrisons which posted a 2.6% drop in sales.

Biggest fallers on the FTSE 100
Biggest fallers on the FTSE 100 Photograph: Thomson Reuters

Alastair McCaig, Market Analyst at IG, predicts few surprises from the BoE today.

Last quarter’s Super Thursday was not that super and it is difficult to see where the shock and awe will come from this time round. City traders will have to digest a plethora of data in quick succession, with a rate decision, policy minutes and the inflation report all followed by a speech from Mark Carney.

We might see another member vote for change but other than a 7-2 result it would be hard to see any change being viewed as anything other than forced.

Despite the emissions scandal, Volkswagen still had two cars in the top-ten bestsellers in the UK last month.

This chart from today’s report shows that Golfs and Polos remained popular:

UK car sales
UK car sales Photograph: SMMT

And VW insiders are playing down suggestions that customers are shunning it.

ITV business editor Joel Hills says:

“It could have been a lot worse” a source at VW tells me. “UK sales are pretty robust”. VW’s Golf and Polo models moved up the best-seller list.

George Magnus

Experienced City economist George Magnus, adviser to UBS, is on Bloomberg TV now, arguing that there is no reason for the Bank of England to raise rates yet.

Instead, Mark Carney and colleagues should wait and let the US Federal Reserve make the first move (possibly at its December meeting).

Magnus says:

The danger if the Bank steals a march on the Fed it could push up the pound, which is bad for manufacturing.

Magnus also warned that the upcoming EU referendum is the “big unknown, hanging over the economy like a big black cloud”.

Two hours to go until the Bank of England begins the Super Thursday party:

Updated

The SMMT says it is too early to tell if the drop in VW sales is due to the emission scandal.

Mike Hawes, SMMT Chief Executive, argues that the UK car sector is still robust, even though sales growth has finally dipped.

“The UK car market has gone through a period of unprecedented growth and, so far, 2015 has been a bumper year with the strongest performance since the recession.

As expected, demand has now begun to level off but the sector is in a strong position, as low interest rates, consumer confidence and exciting new products combine to attract new car buyers. The current full-year growth forecast remains on track.”

Volkswagen UK sales fall nearly 10%

Volkswagen sales in the UK have fallen, suggesting the company has been hurt by the news that it faked emission test results.

Sales of Volkswagen-branded models tumbled by 9.8% year-on-year in October, from 15,495 to 13,970, according to the SMMT’s new report. That means its market share shrank from 8.62% to 7.86%.

Other VW brands saw sales fall.

SEAT sales tumbled by 32%, from 3,450 to 2,338, while Skoda dipped by 3%.

Audi, though, posted a 3% jump in sales compared to a year ago, even though it has been caught up in the scandal.

And it’s worth noting that other carmakers had a bad month. Sales of Minis (part of the BMW group) fell by a fifth from 5,262 to 4,112.

But it’s certainly not great news for VW, on top of the plunge in South Korean sales reported this morning (see 7.50am post)

Updated

UK car sales fall for first time in 43 months

Just in. UK car sales have fallen, for the first time since early 2012.

The Society of Motor Manufacturers and Traders reports that new registrations were down 1.1% in October, compared with a year ago.

Sales so far this year are still 6.4% higher than in 2015, but it looks like the long run of post-recession growth is finally tailing off:

UK car sales

Here’s the key points from the SMMT’s sales report:

  • New car registrations see 1.1% decline in October following period of phenomenal record growth.
  • Total market year-to-date up 6.4% to 2,274,550 units registered – the best performance on record.
  • Alternatively fuelled vehicle market enjoys 13.8% boost, with diesel and petrol registrations steady.

Just looking at the detail of the report now….

Updated

Jeremy Cook, chief economist at currency firm World First, reckons UK interest rates will remain at their record lows for another six months.

London newspaper City AM runs a ‘shadow MPC’, asking nine senior economists how they would vote.

And this month, it has split 6-3, with a trio calling for a rate hike.

One of the “shadow hawks” is Simon Ward of Henderson Global Investors, who argues:

Raise. Corporate liquidity is surging. Private pay growth is over three per cent, while productivity remains sluggish. Global risks have faded.

Andrew Sentance, who once served on the MPC, also believes the BoE should raise rates:

Here’s a handy chart showing which BoE policymakers appear keen to raise rates soon, and which are reluctant….

Andy Haldane, the premier Dove, has even suggested recently that rates might be cut to new record lows….

Updated

Some economists believe that divisions at the Bank of England over interest rate policy will widen today during Super Thursday.

At recent meetings, the monetary policy committee has split 8-1, with only Ian McCafferty voting to hike borrowing costs from 0.5% to 0.75%.

But a 7-2 split can’t be ruled out, or even a 6-3 (although that might be pushing it).

And that’s why Simon Wells, chief UK economist at HSBC, says today does feel like a “big day”.

Simon Wells of HSBC
Simon Wells of HSBC (left) Photograph: Bloomberg TV

He told Bloomberg TV:

It’s Bonfire Night, and if there are fireworks here, it will be in the vote.

Kristin Forbes has been very hawkish of late, and she may go and join McCafferty, and possibly Martin Weale too.

The markets would “react strongly” to a 6-3 split, probably driving the pound sharply higher on expectations of an early rate hike.

Wells expects that first rise will come in February 2016, so the BoE may be keen to communicate that today.

Today is probably the Bank of England’s last chance to prepare people for an interest rate hike early next year.

Brian Hilliard, chief U.K. economist at Societe Generale, explains:

“It’s make or break for clear communication on a first-quarter rate increase.

“If it is going to happen in February they’re going to have to send a strong and clear signal.”

German factory orders fall again

A German supporter with the national flags on her head watches the World Cup soccer match between Germany and Ghana at a public viewing area in Hamburg, southern Germany, on Wednesday, June 23, 2010. (AP Photo/Matthias Schrader)

As if the Volkswagen scandal wasn’t bad enough, Germany’s factories have also suffered another drop in demand orders.

Industrial orders fall by 1.7% in September, new figures show, the third monthly decline in a row.

That’s rather worse than expected – economists forecast a 1% rise – and it suggests Europe’s largest economy is suffering from weaknesses overseas.

The economy ministry didn’t try to sugar-coat the figures either, saying that “overall, industrial orders are in a weak phase”.

Updated

VW sales slide in South Korea

Sign at the Volkswagen Chattanooga Assembly Plant in Chattanooga, Tennessee November 4, 2015. Volkswagen told NHTSA that it would recall about 92,000 vehicles, which are some 2015 and 2016 models of Jetta, Passat, Golf and Beetle, in the United States. REUTERS/Tami Chappell

We have firm evidence that the emissions scandal has hurt Volkswagen, from South Korea.

Sales to South Korean customers almost halved in October, new figures show, dropping below the 1,000 mark for the first time since 2011.

The Korea Automobile Importers & Distributors Association reported that VW only sold 947 cars last month, following the revelations that it used software to cheat nitrogen oxide emission tests. That’s 46% lower than a year ago, and 67% below September’s figures.

The sales collapse for Volkswagen contrasted with a 6% rise in sales of imported cars in South Korea in the same period, Reuters points out.

Have UK drivers also abandoned VW? We find out at 9am when the latest sales figures are released….

Updated

Introduction: Bank of England rate decision, and more…

Bank of England Governor Mark Carney makes a speech at The Sheldonian Theatre in the University of Oxford on October 21, 2015 in Oxford, United Kingdom. Carney spoke about the benefits and risks of Britain’s EU membership. (Photo by Eddie Keogh-Pool/Getty Images)
Bank of England Governor Mark Carney, who will hold a press conference at 12.45pm today Photograph: Pool/Getty Images

Happy Super Thursday!

The Bank of England is preparing to hit us with a quadruple whammy of news and economic data at noon.

Firstly, the Bank’s Monetary Policy Committee will set UK interest rates. A rate rise isn’t expected, but some members of the MPC may vote for the first hike since the financial crisis began. Last month they split 8-1, but could another hawk jump the fence?

The minutes of the meeting are also released at noon, showing the details of the committee’s discussions and its views on the UK and global economy.

We also get the latest quarterly inflation report, packed with new economic forecasts.

And if that’s not enough of a treat, the Bank governor Mark Carney then holds a press conference at 12.45pm. That’s his opportunity to guide the markets – and potential housebuyers and borrowers – on the chances of an interest rate rise in early 2016.

Also coming up today….

We get new UK car sales figures for October at 9am. They are expected to show that some customers have deserted Volkswagen following its emissions crisis.

In the City, we have some disappointing results from Morrisons, which has reported its 15th straight quarterly sales fall.

And the European financial markets are expected to be calm, after a solid trading day in Asia which saw the Chinese market rise 20% above its recent low.

That means they are back into a bull market, as traders put this summer’s panic selling behind them.

We’ll be tracking all the main events through the day….

Updated

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Prices across the single currency region were flat in October while Europe’s unemployment crisis has eased. American household spending rose by just 0.1% in September, down from 0.4% in August. Canadian economic growth slows…

 

Powered by Guardian.co.ukThis article titled “Eurozone emerges from deflation as unemployment hits three-year low – live updates” was written by Graeme Wearden, for theguardian.com on Friday 30th October 2015 13.04 UTC

The latest US economic data just hit the wires, and paints a mixed picture of the world’s largest economy.

American household spending rose by just 0.1% in September, down from 0.4% in August, and only half as fast as economists expected.

But US labour costs have risen by 0.6% during the last quarter, up from 0.2% in the previous three months. That’s a broad measure of pay, suggesting salaries are rising as the employment market continues to tighten.

US consumer spending and income

So on balance, it doesn’t really settle the debate on whether US interest rates will go up before Christmas (as covered in the intro).

Updated

Canadian growth slows in August

Digital illustration - Canadian Flag<br />C95250 Digital illustration - Canadian Flag

The global slowdown has rippled across to Canada.

Canadian GDOP rose by only 0.1% in August, data just released showed, down from 0.3% in July.

That follows this week’s trend of slowing growth in the last quarter (in the UK, the US and Spain).

It’s the third monthly expansion in a row in Canada, following contractions earlier in the year. On an annual basis, the economy was only 0.9% bigger than 12 months ago.

Updated

Over in Lisbon, Portugal’s new government is being sworn in after a general election that produced no clear winner.

It means Pedro Passos Coehlo remains as prime minister, but leading a minority government.

Portugal’s president sparked controversy by asking Passos Coehlo to form the next administration, even though left-wing parties won a majority of seats between them.

This sparked talk that a coup had been perpetrated. But in truth, the wheels of democracy will keep turning.

The opposition will get their chance to kick Passos Coehlo out of office early next month, in a vote of confidence on the new government’s policies.

Merkel has used her China trip to call for more protection for Europe’s steel industry, which has been ravaged by falling prices and overcapacity.

Over to Reuters’ Andreas Rinke:

At a German-Sino business congress in Hefei, Merkel calledfor better protection of the steel and solar industries against unfair international competition, a complaint some manufacturers make against China.

Merkel said the steel sector needed “a certain amount of market protection” as steelmakers have pointed out that environmental regulations differ from country to country,impacting cost advantages.

“I also hope that we can extend the rules already in placein the solar sector,” she added.

Updated

Angela Merkel also had an opportunity to pass on some football tips to the next generation today, during a trip to a primary school in Xin Nan Cun.

German Chancellor Angela Merkel visits China<br />epa05003214 German chancellor Angela Merkel (C) visits a physical education class in Xin Nan Cun, China, 30 October 2015. Merkel is on a two-day official visit to China. EPA/SOEREN STACHE

Updated

Angela Merkel has also predicted that China’s economy will avoid a crash, during her trip to Hefei today.

She told journalists:

“I think one can expect that China’s growth will be a bit weaker, but that it will have constant growth.

“It is obvious that particularly the domestic demand through growing cities is an important factor to stimulate consumption and here with growth.”

This is Merkel’s eighth visit to China since becoming Germany’s leader a decade ago, underlining the importance of the links between Berlin and Beijing.

Photos: Angela Merkel visits China

Angela Merkel has been hard at work building closer trade links with China.

The chancellor has put worries over Germany’s economy, and Europe’s escalating refugee crisis behind her. And the latest photos from the trip suggest it’s going well.

Merkel got a warm welcome from students at Hefei University in Hefei, capital of east China’s Anhui Province….

Students with a banner await the arrival of German Chancellor Merkel at the German University in Hefei<br />Students with a banner that reads “Good day, Mrs Merkel!” await the arrival of German Chancellor Angela Merkel at the German University in Hefei October 30, 2015. REUTERS/ JOHANNES EISELE/Pool

…and then shared a drink with Chinese Premier Li Keqiang, using beer brewed by the students #cheers

Angela Merkel visit to China - 30 Oct 2015<br />Mandatory Credit: Photo by Xinhua/REX Shutterstock (5331237b) Chinese Premier Li Keqiang (L) and German Chancellor Angela Merkel (C) drink beer brewed by Chinese and German students during their visit to Hefei University in Hefei, capital of east China’s Anhui Province Angela Merkel visit to China - 30 Oct 2015

Merkel also told reporters that Germany favours granting China “market economy status” – a shift that would make it harder for the EU to protect local industry from Chinese competition.

However, Beijing still “has to do some homework, for example in the area of public procurement,” she added (Reuters reports)

German Chancellor Angela Merkel Visits China<br />HEFEI, CHINA - OCTOBER 30: German Chancellor Angela Merkel smiles during a signing ceremony on October 30, 2015 in Hefei, China. Merkel is in Hefei, capital of east China’s Anhui Province, for a one day visit, accompanied by her Chinese counterpart Li Keqiang. (Photo by Johannes Eisele - Pool/Getty Images)

A signing ceremony in Hefei. Photograph: Pool/Getty Images

And she also met a group of children in the Baohe district of Hefei:

Angela Merkel<br />German Chancellor Angela Merkel , left, greets village children in Baohe district of Hefei, China, Friday, Oct. 30, 2015. (Johannes Eisele/Pool photo via AP)

Updated

European Central Bank (ECB) president Mario Draghi addresses a news conference after a meeting of the ECB Governing Council in St Julian’s, outside Valletta, Malta, October 22, 2015. European Central Bank President Mario Draghi said on Thursday monetary policy alone cannot solve the euro zone’s economic problems and called on member countries to take additional actions alongside. REUTERS/Darrin Zammit Lupi MALTA OUT. NO COMMERCIAL OR EDITORIAL SALES IN MALTA

European Central Bank (ECB) president Mario Draghi. Photograph: Darrin Zammit Lupi/Reuters

Mario Draghi will be pleased to see the eurozone clamber out of deflation this month, but it only takes a little pressure off his central bank.

Last week, the ECB chief hinted that more stimulus could be needed soon, as inflation remained sharply off course.

Bill Adams, senior international economist at PNC Financial Services Group, believes Draghi will make an announcement at its next meeting:

The ECB’s most likely next move is to announce an extension in December of the duration of its quantitative easing program to last through March 2017. But hawks on the Governing Council may point to an exit from deflation as a reason for the ECB to continue with asset purchases in 2016, but without as clear a pre-commitment as they made in 2015.

This would provide the ECB with discretion to begin a taper of its easing program earlier than expected if inflation surprises to the upside due to pass-through of higher import prices or higher food prices (unprocessed food prices rose 3.0% from a year earlier in October).

No time like the present, eh?….

Updated

European Union jobless rate hits six-year low

Unemployment in the wider European Union has hit a six-year low of 9.3%, even better than the 3.5 year low of 10.8% in the eurozone:

But that still leaves 22.631 million men and women out of work in the 28 countries which make up the EU.

Eurostat explains:

The EU28 unemployment rate was 9.3% in September 2015, down from 9.4% in August 2015, and from 10.1% in September 2014. This is the lowest rate recorded in the EU28 since September 2009.

But this is still far, far too high — almost twice the levels in the UK and the US.

And many countries are still lagging behind.

The highest rates were recorded in Greece (25.0% in July 2015) and Spain (21.6%) — a reminder that the Spanish recovery hasn’t fully fed through to its labour market.

The lowest were recorded in Germany (4.5%), the Czech Republic (4.8%), Malta (5.1%) and the United Kingdom (5.3% in July 2015).

Updated

It’s almost a year since oil prices began to tumble on the world markets, giving the global economy a deflationary squeeze.

The impact of cheap oil should soon start to drop out of the annual inflation rates, though (as prices will no longer be cheaper than a year ago). And that could send consumer prices indices up again….

This is the second time this year that the eurozone has shaken off a bout of negative inflation:

Updated

Eurozone unemployment hits lowest since January 2012

Europe’s unemployment crisis has eased a little, in another little boost to the region.

Eurostat reports that the overall jobless rate dropped to 10.8% in September, down from 10.9% in August.

That’s lower than economists had expected, and is the lowest level since January 2012.

Although the eurozone’s inflation rate was zero in October, that masks wide differences across the economy.

Today’s eurozone inflation data shows that food prices rose by 1.5% year-on-year in October, while service sector costs were up by 1.3%.

Other goods prices only rose by +0.4%, while energy costs slumped by 8.7%.

So on average prices were unchanged (as the economist with one foot in a bucket of scalding hot water and the other foot in a bucket of ice might put it)

Eurozone inflation rises to 0.0%

The eurozone has emerged from deflation!

Prices across the single currency region were flat in October, having shrunk by 0.1% the previous month.

That’s broadly in line with forecast, and shows how little inflationary pressure there is in the eurozone (due to weak energy prices).

Core inflation (which strips out volatile elements such as energy and food) across the eurozone rose to 1% – well below the ECB’s 2% target.

Updated

European stock markets are subdued this morning, as investors wait for the latest eurozone inflation and unemployment data in 25 minutes.

The FTSE 100 has lost 5 points, or just under 0.1%, while the French and German markets are up just 0.15%.

But still, fears that we could suffer a grim October have not come to pass, with most indices posting strong gains this month:

Looking back at Japan…some economists believe the BoJ may beef up its stimulus package in November, when it meets again.

By then, they should have new growth figures showing whether Japan’s economy shrank in the last quarter, or not.

Mitsuo Shimizu, deputy general manager of Japan Asia Securities Group, says:

“They could move after the next meeting – expectations for more easing aren’t going away.”

But there’s also an argument for waiting until the US central bank’s next meeting in December. If the Fed does hike interest rates, then the yen will weaken against the US dollar without the BoJ needing to do anything….

Italy’s unemployment rate has dipped to its lowest point since January 2013 but still remains worryingly high.

New data shows that the Italian jobless rate fell to 11.8% in September, from 11.9% in August, suggesting prime minister Matteo Renzi’s reform plan may finally be bearing some fruit.

It’s better than economists expected.

In 50 minutes time we get the overall eurozone unemployment report….

Updated

Spain’s recovery has been partly due to a strong tourist season, which helped it overcome the housing crash.

The FT’s Ian Mount explains:

Record spending by foreign tourists has helped speed Spain’s recovery from a double dip recovery that began after its real estate bubble popped in 2008.

Tourists injected €53.8bn into the economy over the first nine months of 2015, 6.3 per cent more than in the same period in 2014.

Capital Economics fears that today’s GDP report shows Spain’s ‘impressive’ recovery is faltering a little:

Holger Sandte of Nordea Markets is concerned that Spain’s building and housing sector is still in the mire:

Spanish GDP up by 0.8% as recovery continues

Spain’s economic recovery continues, although at a slightly lower speed.

The Spanish statistics body reports that GDP rose by 0.8% in the last three months, compared to 1% in the second quarter of this year.

On an annual basis, the economy grew by 3.4%, up from 3.1%.

This is the 9th consecutive quarter of growth in Spain, which has been one of the best performing European economics since the debt crisis eased in 2012.

Spanish GDP

Spanish GDP Photograph: Spanish statistics office

Spain is the first eurozone country to report growth figures (we get most of the data in two weeks time).

Today’s numbers mean it is growing faster than the UK, which reported a GDP increase of 0.5% on Tuesday. It also beats America’s annualised rate of 1.5% (which is <0.4% on a quarter-on-quarter basis).

Reaction to follow….

Kuroda predicts moderate recovery for global economy

Governor Kuroda is also trying to dampen fears over China’s economy, and its impact on Japan.

He says he agrees with the IMF that the slowdown in China could last longer than expected, which would be bad for Japanese trade:

Many Japanese companies operate in East Asia so their profits may also be affected.

But he’s still optimistic that the region’s economies are resilient enough to cope:

Our main scenario is for the global economy to recover moderately, driven by the strength in advanced economies.”

Here’s some instant reaction to BoJ governor Haruhiko Kuroda’s comments:

BoJ’s Kuroda: We won’t hesitate to do more

The Bank of Japan (BOJ) building in Tokyo, October 30, 2015. The Bank of Japan held off on expanding its massive stimulus program on Friday, preferring to save its dwindling policy options in the hope that the economy can overcome the drag from China’s slowdown without additional monetary support. REUTERS/Thomas Peter

The Bank of Japan (BOJ) building in Tokyo today. Photograph: Thomas Peter/Reuters

The Bank of Japan has fuelled speculation that it could soon announce fresh stimulus measures, after cutting the Bank’s inflation and growth forecasts.

Governor Haruhiko Kuroda has just told a press conference that the BoJ has more ammunition at its disposal, as it battles against the deflationary pressures gripping the globe.

Kuroda insisted that the BoJ could still hit its target of getting inflation to 2% (even it is is taking longer than hoped), saying:

“We won’t hesitate to make necessary policy adjustments if we judge that there is a change in the broad price trend.”

“I’m not thinking of raising or lowering the current 2% inflation target.”

And on the details of monetary policy, Kuroda declared:

“I don’t think there are limits to our policy options.”

Kuroda was speaking after the BoJ left its current stimulus programme unchanged at its latest policy meeting, despite evidence that Japan hasn’t shaken off the spectre of deflation.

The BoJ also cut its forecast for real economic growth for the current fiscal year to 1.2% from 1.7%. It also kicked back the target for hitting 2% inflation to the back end of 2016, or even early 2017, from the middle of next year.

Some analysts had thought the Bank might boost its 80 trillion yen annual asset-buying scheme today, but Japan’s policymakers are hopeful that the global economy will pick up.

But there are signs that more may be needed. New figures showed that consumer prices fell 0.1% in the year to September, a second monthly decline, while household spending slid 1.3 percent from a year earlier.

More here:

Updated

The Agenda: Will eurozone emerge from deflation?

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

It looks like another busy day for economic news, as policymakers, analysts and the public all ponder the state of the global economy as the year grinds towards its close (just 55 sleeps till Christmas, folks!)

In Europe, the latest inflation data come at 10am GMT. It may show that prices stopped falling in the eurozone, after dropping by 0.1% in September.

We also get European unemployment figures – likely to show that the eurozone jobless crisis is still severe:

EU jobs

Europe’s unemployment rate has been stubbornly high since the debt crisis began Photograph: ONS

There’s also a flurry of data coming our way from across the Atlantic. That includes US personal spending stats at 12.30pm and the University of Michigan confidence report at 2pm GMT.

They’ll both provide more ammunition for the ongoing debate about whether the Federal Reserve will take the plunge and raise interest rates at its December meeting (just 47 sleeps to go!).

Canada will become the latest major economy to report growth figures – economists predict that growth slowed to 0.1% in August from 0.3% in July.

And in the City, it’s quite busy for a Friday.

BG Group, the oil company, has been hit by the weak crude price:

And Royal Bank of Scotland has suffered an operating loss of £134m in the last quarter, after taking a £847m charge to cover restructuring costs.

It still managed to post a net profit though:

More details on that later, along with all the main events through the day….

Updated

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German bosses are more optimistic about future prospects but UK factories suffer as exports fall the fastest since 2012. Portuguese government bonds are coming under some pressure today as investors react to the unfolding political crisis…

 

Powered by Guardian.co.ukThis article titled “Germany shrugs off VW crisis, but UK factory orders slide – business live” was written by Graeme Wearden, for theguardian.com on Monday 26th October 2015 13.26 UTC

Portuguese bonds hit by political crisis

Portuguese government bonds are coming under some pressure today as investors react to the unfolding political crisis in Lisbon.

While most eurozone bonds have strengthened today, Portugal has gone the other way, pushing up the yield (or interest rate) on its 10-year debt from 2.37% to 2.45%.

Portuguese 10-year bond yield
Portuguese 10-year bond yield today Photograph: Thomson Reuters

The move came after opposition parties vowed to bring down Portugal’s new government in a confidence vote later this week. They’re furious that the centre-right coalition, led by former PM Pedro Passos Coelho, has been invited to form another administration despite failing to win a majority in this month’s election.

In taking this decision, Portugal’s president Cavaco Silva has enraged some certain commentators who argue that he’s “banned” the Portuguese left-wing a fair crack at power in a massive failure for democracy.

It’s a complicated situation, though. No party won an overall majority, although Passos Coelho’s group came first with 38% of the vote. The socialists came second with 32% followed by the hard left Left Bloc with 10% and the communists with 7%.

Those three left-wing parties *could* form a majority, but instead president Silva passed the mandate to Passos Coelho. Crucially, and controversially, he also warned that the far-left parties’ anti-EU views were a threat to Portugal.

Politics lecturer Chris Hanretty has written a good blogpost here, explaining why talk of a coup in Portugal is a little simplistic.

He says:

Often, there is no right or obvious answer to the question, “who won the election?”. But if Cavaco Silva’s decision is wrong, then it will be righted automatically by the actions of Parliament in less than a fortnight’s time.

If that happens, the alarmists will have been proven wrong. Unfortunately, attention will likely have moved on.

Sam Tombs of consultancy firm Pantheon Macroeconomic fears that UK factories will continue to struggle because of the strong pound.

He’s created a chart showing how exports fall after the the pound strengthens (the inverted left-hand scale, shifted forwards nine months).

And that correlation means factory orders could continue to weaken, Tombs explains:

The chart shows that the worst is not over for the manufacturing sector; sterling’s further appreciation over the last year will continue to depress export orders until mid-2016, at least.

IHS economist Howard Archer is alarmed by the drop in UK factory orders reported by the CBI:

This is a thoroughly disappointing survey through and through which indicates that manufacturers’ struggles are intensifying as a moderation in domestic demand adds to a still weakening export outlook.

Persistent and seemingly deepening manufacturing weakness is very worrying for hopes that UK growth can ultimately become more balanced and less dependent on the services sector and consumer spending.

Factory fears as UK exports fall at fastest pace since 2012

A turbine at Alstom power plant turbine refurbishment facility in Rugby.
A turbine at Alstom power plant turbine refurbishment facility in Rugby. Photograph: Bloomberg/Bloomberg via Getty Images

More signs that UK manufacturers are having a tough time as they contend with China’s downturn and a stronger pound.

The latest survey of factory bosses by business group CBI suggests orders have dropped from both within the UK and outside. The report’s key order book balance is the weakest for more than two years.

This does not bode well for official GDP figures due on Tuesday that will give the first snapshot of UK growth in the third quarter. The consensus forecast is for quarterly growth of 0.6% in the July-September period, down from 0.7% in the second quarter, according to a Reuters poll.

The CBI’s report suggests that in the three months to October new export orders fell at the fastest pace in three years. That was possibly down to the continued strength of the pound, which makes UK goods more expensive to overseas buyers, the CBI said.

Total new domestic orders fell over the quarter for the first time since April 2013.

Manufacturing production also edged downwards during the three months to October, marking the first decline in the last two years, according to the CBI Quarterly Industrial Trends Survey.

Against that backdrop, manufacturers’ optimism about both their business situation and export prospects for the year ahead fell at the fastest pace since October 2012, according to the poll of 463 companies. But they predicted that overall manufacturing conditions will stabilise in the next three months, with a small rise in output.

Rain Newton-Smith, CBI director of economics, says UK manufacturers are being buffeted at home and abroad.

“Manufacturers have been struggling with weak export demand for several months, because of the strength of the pound and subdued global growth. But now they’re also facing pressure back home as domestic demand is easing.”

And here are the key figures from the report:

  • 22% of businesses reported an increase in total new order books and 30% a decrease, giving a balance of -8%, the lowest since October 2012.
  • 20% of businesses reported an increase in domestic orders, with 31% noting a decrease. The balance for domestic orders (-11%) was below the long-run average (-5%), the lowest since April 2013 (-14%).
  • 15% reported an increase in export orders, with 33% signalling a decrease. The resulting balance for export orders (-17%) signalled a faster decrease in orders than the historic average (-7%). This marks the lowest rate since October 2012 (-17%).

Germany’s central bank reckons that the country’s economy remains “quite strong”, despite signs that growth slowed in the last three months.

Peterson leaves Southwark Crown Court in London<br />Magnus Peterson leaves Southwark Crown Court in London October 14, 2014. Magnus Peterson, the founder of the $600 million Weavering hedge fund that collapsed in the wake of the credit crisis in 2009, pleaded not guilty to 16 fraud-related charges at his London trial on Tuesday. REUTERS/Stefan Wermuth (BRITAIN - Tags: BUSINESS) - RTR4A646
Magnus Peterson in 2014. Photograph: Stefan Wermuth / Reuters/REUTERS

Former hedge fund boss Magnus Peterson has just been banned from the City, over one of the biggest rogue trading scandals of recent years.

Peterson’s Weavering Macro Fixed Income Fund collapsed in 2009, costing investors around £350m. It had been marketed as a safe and secure investment, which investors could easily reclaim their funds from.

But once the financial crisis struck, Peterson embarked on a series of risky wagers on financial derivatives which failed to reverse its fortunes. He was convicted of several counts of fraud, after the high court heard how he had taken out $600m of swap contracts, which turned out to be worthless, with another company under his control.

Mark Steward, director of enforcement and market oversight at the FCA, says Peterson has been banned to protect consumer and markets.

“Mr Peterson defrauded investors who should have been able to trust him. Over a prolonged period he purposely used investors’ money to prop up his business, and then lied in order to cover up his deception.”

This makes little practical difference to Peterson, aged 51, right now, as he was jailed for 13 years in January.

Updated

9% hacked off TalkTalk shares after cybercrime attack

Back in the City, UK telecoms group TalkTalk is the biggest faller on the stock market after suffering a major cybercrime attack last week.

TalkTalk shares have slumped by around 9.5% this morning. Last week, the firm admitted that customers’ personal and financial details could have been stolen by cybercriminals who breached its security systems.

TalkTalk boss Dido Harding told my colleague Josh Halliday last night that it’s too early to say if the company will compensate those affected.

She also argued that TalkTalk’s security was better than its rivals, despite the breach:

“Nobody is perfect. God knows, we’ve just demonstrated that our website security wasn’t perfect – I’m not going to pretend it is – but we take it incredibly seriously.

“On that specific vulnerability, it’s much better than it was and we are head and shoulders better than some of our competitors and some of the media bodies that were throwing those particular stones.”

And despite criticism from shareholders, Harding is determined to hold onto her job:

Updated

IFO: German car industry unfazed by VW scandal

IFO economist Klaus Wohlrabe has confirmed that Germany’s auto industry is shrugging off the revelations that VW deliberately cheated on emissions tests.

Speaking to Reuters about today’s IFO report, Wohlrabe pointed out that business expectations and the assessment of current conditions in the sector had both improved this month.

That helped to push IFO’s measure of business confidence higher this month, from 103.3 to 103.8.

Wohlrabe says:

The German automobile industry appears to be unfazed by the VW scandal.

Updated

German business leaders aren’t frightened by the crisis at Volkswagen, and the slowdown in emerging markets, explains Carsten Brzeski of ING.

Here’s his analysis on today’s IFO report:

Surprised but not frightened? German businesses showed an interesting reaction to the recent series of uncertainties and turmoil. In fact, the reaction can be summarized as impressed but not frightened.

Germany’s most prominent leading indicator, the just released Ifo index dropped to 108.2 in October, from 108.5 in September. The first drop since June this year. Interestingly, the drop was exclusively driven by a weaker assessment of the current situation. The expectation component, on the other side, increased to 103.8, from 103.3, continuing its recent positive trend and actually reaching the highest level since June last year.

Of course, one should not interpret too much in a single confidence indicator but today’s Ifo reading suggests that the German business community is filing the Volkswagen scandal as a one-off and also shrugs off the risk from a possible Chinese and emerging markets slowdown. Despite these external uncertainties and regular concerns about the real strength of the German economy, German business remain highly optimistic.

There are two possible explanations for this trend: either German businesses are naive optimists or ice-cold realists, sticking to the facts. In our view, there are many arguments in favour of the latter.

Updated

The euro is slightly higher following the IFO survey:

Updated

German IFO survey: What the experts say

Today’s German business confidence survey shows Europe’s powerhouse economy remains in decent health, say City experts.

Economist Frederik Ducrozet is encouraged by the rise in business expectation this month:

Die Welt’s Holger Zschaepitz points out that confidence in the German carmaking industry rose this month:

Bloomberg’s Maxime Sbaihi points out that demand within Germany is still robust:

Updated

German business climate worsens, but expectations rise

Business conditions in Germany have fallen this month, according to the latest survey of corporate confidence in Europe’s latest economy.

The IFO thinktank has just reported that current conditions in the German economy have deteriorated this month, for the first time in four months.

But IFO also found that business leaders are more upbeat about future prospects than in September. That suggests the VW emissions scandal has not caused major trauma.

IFO’s business climate index fell to 108.2 in October, down from 108.5 in September, but rather higher than expected.

The current conditions index fell to 112.6, from 114 a month ago. That suggests that business leaders are finding life a bit harder — after seeing exports and factory orders deteriorate over the summer.

But the expectations index rose to 103.8, from 103.3, indicating that Germany PLC expects to ride out the slowdown in China and other emerging markets, and the Volkswagen saga.

I’ll mop up some reaction now…

Updated

Speaking of carmakers…Japan’s Toyota has overtaken Germany’s Volkswagen to become the world’s largest carmaker.

Toyota has reported that it sold almost 7.5 million cars in the third quarter of 2015, while VW sold 7.43m.

Does that show that the diesel emissions scandal has hurt VW? Not really — that news only broke in mid-September, giving little opportunity for it to show up in these figures.

But it does show that VW may already have been finding life tougher, even before admitting that around 11 million vehicles were sold with software to trick emissions tests.

(FILES) - The logo of French car maker PSA Peugeot is seen on a car parked in front of French Economy minstry (left) in Paris, on September 11, 2012. French auto giant PSA Peugeot Citroen’s worldwide sales in 2012 dropped by 16.5 percent in 2012 due to contracting demand in debt-crippled southern Europe and the suspension of its activities in Iran, it said in a statement on January 9, 2013. AFP PHOTO JOEL SAGETJOEL SAGET/AFP/Getty Images

Shares in French carmaker Peugeot are down 2% this morning, after reporting a 4.4% drop in sales in China and South East Asia.

That took the shine off a 3.8% rise in sales in Europe.

WPP: business leaders remain ‘risk averse’

Sir Martin Sorrell, WPP chief executive, hides his head in his hand.

Advertising titan WPP is among the biggest fallers in London, down around 2%, despite reporting a 3.3% rise in net sales in the last six months.

Traders may be discouraged by a warning that “risk averse” business leaders are reluctant to stick their necks out too far, given the current geopolitical tensions.

WPP told shareholders that:

Country specific slowdowns in China and Brazil and geopolitical issues remain top of business leaders’ concerns. The continuing crisis in the Ukraine and consequent bilateral sanctions, principally affecting Russia, continued tensions in the Middle East and North Africa and the risk of possible exits from the European Community, driven by further political and economic trouble in Greece, top the agenda.

Corporate bosses are also facing a two-pronged squeeze — from new technology rivals on one side, and cost-cutting activists on the other, WPP added:

If you are trying to run a legacy business, at one end of the spectrum you have the disrupters like Uber and Airbnb and at the other end you have the cost-focused models like 3G in fast moving consumer goods, and Valeant and Endo in pharmaceuticals, whilst in the middle, hovering above you, you have the activists led by such as Nelson Peltz, Bill Ackman and Dan Loeb, emphasising short-term performance.

Not surprising then, that corporate leaders tend to be risk averse.

European markets in muted mood

As predicted, Europe’s stock markets have fallen into the red this morning.

The FTSE 100 has shed arounds 33 points, or 0.5%, as Tony Cross of Trustnet Direct, explains:

It has been a surprisingly muted overnight session in Asia with markets showing little reaction to Friday’s rate cut news out of China.

London’s FTSE-100 is failing to find any inspiration off the back of the news either, with the vast majority of stocks mired in red ink shortly after the open.

The other main markets are also down, apart from Germany’s DAX which is flat.

European stock markets, early trading, October 26 2015
European stock markets in early trading today. Photograph: Thomson Reuters

Mining and energy stocks are generally lower, showing that concerns over global growth haven’t gone away.

Connor Campbell of SpreadEx says:

The FTSE, falling by around 25 points soon after the bell, was weighed down by (what else?) its mining and oil stocks, with investors seemingly less sure about the Chinese rate cut than they were last Friday

Larry Elliott: Why China’s interest rate cut may be bad news for the world economy

By cutting interest rates, China’s central bank risks creating further instability in a global economy that is already hooked on ultra-cheap money and regular hits of stimulus.

As our economic editor Larry Elliott explains, such stimulus measures may already be less effective too:

Problem number one is that by deliberately weakening their exchange rates, countries are stealing growth from each other. Central banks insist that this does not represent a return to the competitive devaluations and protectionism of the 1930s, but it is starting to look awfully like it.

Problem number two is that the monetary stimulus is becoming less and less effective over time. There are two main channels through which QE operates. One is through the exchange rate, but the policy doesn’t work if all countries want a cheaper currency at once. Then, as the weakness of global trade testifies, it is simply robbing Peter to pay Paul.

The other channel is through long-term interest rates, which are linked to the price of bonds. When central banks buy bonds, they reduce the available supply and drive up the price. Interest rates (the yield) on bonds move in the opposite direction to the price, so a higher price means borrowing is cheaper for businesses, households and governments.

But when bond yields are already at historic lows, it is hard to drive them much lower even with large dollops of QE. In Keynes’s immortal words, central banks are pushing on a piece of string….

Here’s Larry’s full analysis on the rate cut:

Copper, a classic measure of the health of the global economy, hasn’t benefitted much from China’s rate cut. It’s only up by 0.2% this morning.

Chinese officials to agree next five-year plan

China is also in the spotlight today as top communist officials gather to hammer out its 13th five-year plan, setting the country’s economic programme until 2020.

Premier Li Keqiang has already indicated that slower growth is on the agenda, by declaring that Beijing will not “defend to the death” its target of 7% growth (which was narrowly missed in the third quarter of 2015).

He declared:

“We have never said that we should defend to the death any goal, but that the economy should operate within a reasonable range.”

Trade links and green issues will also be discussed, as China’s top brass try to manage the country’s economic rebalancing.

With China easing monetary policy last week, and the ECB expected to follow suit in December, it could soon be Japan’s turn to stimulate its economy again….

No jubilation in Hong Kong either, where the Hang Seng index just closed 0.2% lower.

Asian market creep higher after Chinese rate cut

Investors in Asia have given China’s interest rate cut a cautious reception overnight, but there’s no sign of euphoria.

In Shanghai, the main index of Chinese shares rose by just 0.5%, or 17 points, to 3430. Although Friday’s stimulus move has been welcomed, traders are also worrying about whether China is still going to suffer a hard landing.

Said Zhang Qi, an analyst at Haitong Securities in Shanghai, says shares got a small lift from the rate cut:

“But the market appeared to be in correction after it rose a lot in October, and some investors sold stocks on the short-lived rise from the rate cuts. So overall, the market stayed stable today.”

Japan’s Nikkei gained around 0.7%, but the Australian S&P market dipped a little despite hopes that its mining sector would benefit from Chinese stimulus moves.

Asian stock markets, October 26
Here’s the situation across Asia’s stock markets Photograph: Thomson Reuters

Updated

The agenda: Investors await German confidence figures

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

Today we’ll find out whether business confidence in Germany has been badly hit by the Volkswagen saga, and the slowdown in emerging markets.

The latest IFO survey, due at 9am GMT, is expect to show that German firms are gloomier about their prospects. That’s understandable, given the drop in German exports, factory output and orders in August.

We’ll also be mopping up the reaction to China’s interest rate cut, announced late last week.

That did give shares a boost on Friday afternoon, but European stock markets are tipped to fall back this morning, as concerns over the situation in China reemerge.

China’s rate cut came just a day after the European Central Bank hinted that it could boost its stimulus package soon, so investors have lots to ponder.

China cuts interest rates in surprise move – as it happened

In the corporate world, traders are digesting results from advertising giant WPP and French carmaker Peugeot.

And we’ll also be keeping an eye on Portugal, where the president has dramatically asked centre-right leader Pedro Passos Coelho to form another government, rather than two eurosceptic left-wing parties.

Portugal Government Fuels Debate About Democracy in Europe

We’ll be tracking all the main events through the day…..

Updated

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