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European Central Bank refrains from reducing the benchmark rate and keeps monetary policy on hold at Malta meeting. Markets prepare for hints of more QE to come at the ECB press conference. UK retail sales get a boost in September…

 

Powered by Guardian.co.ukThis article titled “Markets expect Draghi to hint of more QE – business live” was written by Julia Kollewe, for theguardian.com on Thursday 22nd October 2015 11.52 UTC

Here’s the ECB’s brief statement:

At today’s meeting, which was held in Malta, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05%, 0.30% and -0.20% respectively.”

The ECB cut rates to record levels to kickstart the economy over a year ago. The main refinancing rate determines the cost of credit in the economy, while the marginal lending facility is the emergency overnight borrowing rate for banks. The deposit facility is the rate on bank overnight deposits, which banks pay to park funds at the central bank.

ECB president Mario Draghi will set out the central bank’s thinking at a press conference at 1.30pm UK time, and whether the bank will make any adjustments to its €60bn a month bond-buying programme.

The ECB has kept its key interest rates unchanged at record lows, as expected.

Updated

However…

Markets steady ahead of ECB decision

Markets are steady ahead of the ECB’s policy decision at 12.45 UK time. The FTSE is trading 0.1% lower at 6340.48 after a profit warning from building merchant Travis Perkins dragged down housing stocks. Germany’s Dax has climbed 0.4% and France’s CAC is 0.15% ahead.

Chris Beauchamp, senior market analyst at spread-betting firm IG, said:

A steady battle of attrition continues in London, with the index still unable to establish a direction after four days of relentless grind. However, at least today we have a real reason for not moving too far – namely the ECB meeting. The general consensus is that Mario Draghi needs to do something to get things moving in the eurozone, but there is a sense that neither the ECB nor financial markets know exactly what that will be. We can hope for some indication that action is on its way, although the ECB president will be understandably keen to keep the details under wraps for now.

Housebuilders are jittery this morning after building merchant Travis Perkins warned on earnings. Weaker demand of late has taken the shine off a steady rise in sales overall, raising concerns that such names as Persimmon, Taylor Wimpey and others may be in line for a more sustained correction.”

Labour has responded to George Osborne’s comment that he is “comfortable” with his decision to cut tax credits. Shadow chancellor John McDonnell said:

Once again we’re seeing the true face of the Tory Party. It is shameful that David Cameron talked about his ‘delight’ at tax credit cuts and now George Osborne has said he is ‘comfortable’ with his decision to take £1,300 a year away from working families.

It’s time for David Cameron and George Osborne to think again and reverse these tax credit cuts.”


Expectations that ECB policymakers will announce fresh stimulus measures have gradually faded since governing council member Ewald Nowotny said last week euro area inflation is ‘clearly missing’ the ECB’s target, noted Jasper Lawler, market analyst at CMC Markets UK. Christian Noyer’s submission that the current QE is “well calibrated” is probably a better reflection of opinion on the governing council.

The ECB embarked on a scheme of sovereign bond purchases (quantitative easing) in March – more than €1 trillion in all at a rate of €60bn a month.

Lawler has looked at the ECB’s options:

A change to QE can really take three forms; increasing the size of asset purchases, increasing the length of the program or adding new assets to the mix such as corporate bonds. It is ten months until the programme is scheduled to end so increasing the length of the program seems rather premature.

Europe’s corporate bond market is not as deep as in the US with most companies traditionally favouring bank lending. Adding corporate bonds to the mix would probably work more as a signal of dovish intent than for any real impact on yields or the euro. If the ECB decided to buy shares or ETFs like the Bank of Japan, that would be a game changer and we’d be off to the races in European equities, but chances are slim.

Increasing the size of the programme would probably put the most downward pressure on the euro of all the likely options. However, the ECB runs the risk of crowding out private bondholders with more purchases, and would add to exit risks once the program finishes.”

So what are we expecting from the European Central Bank today?

As my colleague Graeme Wearden reported:

Economists predict that ECB president Mario Draghi will repeat his pledge from September to add more stimulus if needed. However, few expect decisive action this week.

“The ECB’s October meeting is for watching. Draghi’s message will be dovish, but it’s not time to act yet”, said Holger Sandte, chief European analyst at Nordea Bank.

The ECB is currently committed to buying €60bn (£40bn) of government and corporate bonds each month until September 2016, in an €1.1tn (£810bn) attempt to stimulate growth, inflation and bank lending.

Capital Economics’s Jonathan Loynes expects the ECB to boost its QE firepower to €80bn a month in December, but does not totally rule out an announcement this week.

Updated

George Osborne has welcomed the intervention of Mark Carney in the debate about Britain’s future in the European Union, saying the Bank of England governor has set out the principles for renegotiation, Heather Stewart writes. Read the full story here.

Osborne defends tax credit cuts

My colleague Heather Stewart, the Observer’s economics editor, reports:

George Osborne has defended his planned tax credit cuts to backbench MPs on the cross-party Treasury select committee.

The chancellor has come under growing pressure to soften the proposals; but he insisted: “this is fundamentally a judgment call, and I’m comfortable with the judgment call that I have made, and that the House of Commons has supported this week.” He urged the House of Lords not to overturn parliamentary convention by rejecting the tax credit cuts.

The chair of the committee, Andrew Tyrie, also repeated his demand for the Treasury to provide more detailed analysis of how the proposed cuts will hit households at different points on the income scale.

Updated

Earlier this morning, Lord Lawson, one of the leaders of the Conservative campaign to leave the EU, strongly criticised the Bank of England governor for wading into politics. But Osborne said the former chancellor was “probably a bit disappointed that Mark Carney didn’t agree with him”.

Osborne argued, in front of MPs on the Treasury Committee: “What Mark Carney’s speech shows today is that there is a strong argument for reform.”

Alan Clarke of Scotiabank’s reaction to the strong UK retail sales figures was: Wow!

We know that the consumer has the wind in his / her sales:

  • Solid employment growth of 1.25% y/y;
  • Wage inflation over 3% y/y in the private sector;
  • Zero inflation

That all adds up to robust real income growth. With house price inflation picking up too, that is even more motivation for people to go shopping.

Last but not least, with expectations for the timing of the first rate hike being pushed back to end-2016 / early 2017 then consumer spending is clearly well supported.

In terms of the bigger picture, with Q3 GDP (1st estimate) scheduled for next week, I am all the more confident to go for 0.6% q/q rather than be cautious with 0.5.%.

I’m also starting to think about black eye Friday. Sure, it’s a good scheme to get people into the shops, but with sales volumes like this, do I really need to cut my prices? Not convinced.

Anyway – a great reading, and restores my faith that sooner rather than later is the right call on the first Bank Rate hike.”

George Osborne at the Treasury Committee

George Osborne at the Treasury Committee Photograph: parliamentlive.tv

The chancellor has been asked why the UK government has not clearly set out what it wants to achieve in its negotiations with the EU.

Osborne said it’s not sensible to turn up with a final list of demands on day one. “That’s not the way to start a negotiation.”

Updated

Osborne: not looking for special deal for City of London

Osborne told MPs on the Treasury Committee that the government is not looking for “special deals or carve-outs for the City of London” as it tries to renegotiate the terms of Britain’s EU membership, but wants a fair deal for all non-eurozone countries.

He said the other EU members have accepted the principle of a renegotiation and that discussions are now moving into a technical phase.

We are looking for a fair deal for non-euro members, including the United Kingdom.

We don’t want to be part of ever-closer union.

We are getting into specific discussions, technical discussions with the EU Commission and the Council.

He promised that this autumn more details will emerge as the EU talks move into a new phase.

Updated

An important part of the renegotiation is the relationship between non-euro and euro members of the EU, Osborne said.

George Osborne is being quizzed by the Treasury Committee. MPs are asking about Mark Carney’s remarks on Britain’s EU membership.

The chancellor said:

I agree with the speech the governor made. The analysis he outlined was that EU membership has helped create a more open and dynamic economy, but, and there’s a crucial but, developments in the eurozone mean we do need safeguards for the UK.”

That’s why the UK has embarked on negotiations to secure reforms of the European Union, he added.

As the governor pointed out it’s [EU membership] not an unalloyed good. It’s presented challenges.

The single market in financial services is on balance a good thing for the UK.

The government’s position is not that we are against immigration. We are for controlled migration.

Updated

JPMorgan economist Allan Monks has taken a closer look at Mark Carney’s Brexit speech, which said “ensured there was more than just one liberal Canadian taking the headlines this week”.

The speech will be seen as another foray by Carney into a heated political debate, and its tone comes across as friendly to the campaign for keeping the UK within the European Union – ahead of a referendum which is to be held before the end of 2017.

Accompanying the speech was a chunky 100 page BoE report discussing the impact of EU membership on the central bank’s policy objectives. Despite Carney earlier this week having described the report as “a bit of a yawner” it will not prevent some from asking whether the BoE should be taking a more neutral stance on such a highly charged political issue (especially after similar interventions by Carney on Scottish independence and climate change).

Carney emphasised the report is not a thorough quantitative review of the pros and cons of EU membership, but rather is designed to assess the impact of membership on the Bank’s policy objectives.

In doing so, however, Carney highlights the beneficial impact EU membership has likely had in lifting sustainable growth in the UK (through fostering greater competition, efficiency and openness in key markets). The flip side of this openness to Europe is the higher sensitivity to external shocks, although Carney believes policy makers in the UK have adequate capacity to deal with these challenges.

A key concern for Carney looking forward is that UK policymakers retain adequate flexibility and control over policy, even as euro area countries go through a process of greater integration and risk sharing in the wake of the financial crisis. Carney’s comments have clear parallels with the government’s position in the debate.

The assertion that EU membership is a net positive for the UK, with caveats that the terms of membership need to reflect UK domestic interests and flexibility, will go down well with the Prime Minister – who seeks to renegotiate the terms of membership ahead of the referendum vote, and remove a requirement for the UK to commit to ‘ever closer union’.”

What difference could the BoE’s intervention make? The opinion polls suggest that the result of the referendum will be very close.

Our view has been that opinion will shift as the campaign heats up, with polls indicating a comfortable lead for the campaign to remain within the EU. While a natural status quo bias is central to this view, it also reflects our belief that the “in” campaign will gain the backing of at least a majority in the business community.

This week the CBI – which represents a broad cross section of small and large businesses – moved off the fence by coming out in support for the UK staying within the EU. The rhetoric behind Carney’s remarks put the BoE in the same camp, even if the Governor stops short of offering an explicit endorsement. The impact of these interventions may not be visible in the opinion polls right away, but we would expect them to grow in significance as the referendum draws closer.”

The ONS said retail sales will add 0.1 percentage points to overall economic growth in the third quarter, boosted by beer sales during the Rugby World Cup.

Tills are ringing on the high street: The breakdown of the retail sales figures showed that household goods retailers saw the biggest increase in sales last month, of 4.7%. Supermarkets and other food stores posted a 2.3% rise. Petrol sales were also strong, up 3.8%. However, clothes and shoe retailers did not have a good month, reporting a 0.9% drop.

Excluding petrol, overall retail sales rose by 1.7% in September.

The Rugby World Cup boosted retail sales last month, according to statisticians.

Kate Davies, ONS head of retail sales statistics, said:

Falling in-store prices and promotions around the Rugby World Cup are likely to be the main factors why the quantity bought in the retail sector increased in September at the fastest monthly rate seen since December 2013. The retail sector is continuing to grow with September seeing the 29th consecutive month of year-on-year increases.”

Average store prices (including petrol stations) fell by 3.6% in September from a year earlier, the 15th consecutive month of year-on-year price falls. It was the joint-lowest reading since the series began in 1988.

Updated

Sterling has hit a one-month high of 72.95p against the euro on the strong retail sales figures, up 0.8% on the day. Against the dollar, the pound climbed to $1.5510, up 0.5% on the day.

Updated

UK retail sales jump 1.9%, biggest rise since end 2013

News flash: UK retail sales jumped 1.9% in September from the previous month – the biggest rise since December 2013, according to the Office for National Statistics.

Bank of England paper analyses positive impact of migration

A Bank of England paper on EU membership analyses the positive impact of migration, as Jonathan Portes, director of the National Institute of Economic and Social Research, notes. Click on the link in his tweet to read the paper. It says:

Openness to labour flows – via migration – can allow an inflow of skills not otherwise available in the domestic economy. Ortega and Peri (2014) find that migration boosts long-run GDP per capita, acting both through increased diversity of skills and a greater degree of patenting. At the firm level, several studies further find that migration has a positive impact on productivity by diversifying the high-skilled labour employed by firms.”

Updated

Updated

In other news, Britain’s competition watchdog said highstreet banks will be forced to encourage their customers to switch to rivals. Switching could potentially save bank customers £70 a year, it said.

But consumer groups called on the Competition and Markets Authority to take tougher action to inject competition into banking, after it refrained from more radical measures to break up the biggest players. The market is dominated by the big four banks – Lloyds Banking Group, Royal Bank of Scotland, HSBC and Barclays – which together control 77% of the current account market.

The prime minister and the chancellor both welcomed the governor’s comments last night.

Updated

Howard Archer, chief UK and European economist at IHS Global Insight, said:

Despite Mark Carney’s stressing that his speech and the BOE report is not a comprehensive view of the pros and cons of UK membership of the EU, our strong suspicion is that the pro-EU membership camp will find more to grab hold of and champion than the Out camp.

Carney said Britain was possibly “the leading beneficiary” of the EU’s single market, and that being in the bloc had been one of the drivers of its strong economic performance in the four decades since it first joined.

He made some positive remarks on the free movement of labour, observing that it “can help better match workers with firms, alleviating skill shortages and boosting the supply side of the potential growth rate of the economy.”

In addition, he noted that the UK has been the top recipient of foreign direct investment in the UK since the single market was established in 1992.

Updated

However, Carney’s intervention is also likely to be seen as strengthening David Cameron’s hand in negotiations on reforms with Britain’s EU partners. Carney urged the prime minister to demand “clear principles” to safeguard Britain’s interests outside the euro, as he warned that botched European integration could threaten financial stability.

Lawson slams Carney for wading into EU debate

But former chancellor Nigel Lawson slammed the Bank of England governor for wading into the debate on EU membership, saying his remarks were “regrettable”.

The Spectator’s Coffee House team agreed.

Updated

Catherine Bearder MEP, chair of the Liberal Democrat EU referendum campaign, was quick to seize on Carney’s comments:

The Bank of England’s intervention confirms what we already know: being in the EU brings huge benefits to the UK economy.

Those calling for EU exit have failed to present a credible alternative that would protect the economy and secure jobs.

Instead of retreating to the side-lines, Britain should stay and lead reform in Europe from within.”

More on Carney’s speech on EU membership at St Peter’s College in Oxford last night. The governor concluded:

Overall, EU membership has increased the openness of the UK economy, facilitating dynamism but also creating some monetary and financial stability challenges for the Bank of England to manage. Thus far, we have been able to meet these challenges.”

You can read the speech on the Bank of England’s website, and watch the webcast.

Bank of England governor Mark Carney makes a speech at the University of Oxford.

Bank of England governor Mark Carney makes a speech at the University of Oxford. Photograph: Pool/Getty Images

ECB chief Draghi to hint of more QE

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

Policymakers from the European Central Bank have gathered in Valletta, Malta, for their monthly policy meeting (the governing council occasionally departs from its Frankfurt HQ to meet in other parts of the eurozone). The ECB is widely expected to keep its key interest rates unchanged along with its stimulus programme, despite fears over deflation.

But ECB president Mario Draghi may well strike a dovish tone again, and hint at further action towards the end of the year. Falling consumer prices (they slipped by 0.1% in the eurozone in September) and fears over the world economy suggest the central bank will ease policy at some point, unless things improve.

At the last press conference on 3 September, Draghi pointed to “renewed downside risks” to eurozone growth and inflation prospects, reflecting concerns about the outlook for emerging markets. He said that the ECB stood ready to adjust the size, composition or length of the QE programme if necessary.

Investec economist Chris Hare said:

Despite the QE teasers offered last month, our view is that Mr Draghi will not pull the trigger for now. In part, that is because developments since the then have seen a mixed bag, rather than an obvious worsening in conditions.

We still think that additional QE will be appropriate at some point, given global growth risks and the weakness of eurozone inflation (we are fairly agnostic on whether it will come in terms of size, composition or duration). More natural trigger dates would be the December, or perhaps next March’s, policy meeting. That would allow the ECB to announce the expansion alongside updated forecasts. December is also the month where we think the Federal Reserve will start raising rates: that, alongside a QE boost announcement, might give the euro a double kick down, offering a double whammy of stimulus to get inflation back on track.”

European stock markets are set to open lower ahead of the ECB’s decision, which will be announced at 12.45pm UK time, followed by Draghi’s press conference at 1.30pm.

Over here, Bank of England governor Mark Carney gave his “Brexit” speech in Oxford last night. He said that EU membership opened up the UK economy and made it more dynamic, although he added that it also left it more exposed to financial shocks like the eurozone debt crisis.

Updated

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Kristin Forbes, a member of the Bank of England Monetary Policy Committee, signals she may vote for an interest rate hike on the back of recovering UK economy by downplaying potential fallout for UK from emerging markets slowdown…

 

Powered by Guardian.co.ukThis article titled “Bank of England policymaker says rate rise will come sooner, not later” was written by Katie Allen, for theguardian.com on Friday 16th October 2015 13.06 UTC

An interest rate hike in the UK will come “sooner rather than later” and pessimism about the state of the global economy is overdone, according to a Bank of England policymaker.

Kristin Forbes, a member of the bank’s rate-setting monetary policy committee (MPC), was also upbeat about the domestic economy. She argued that the country had only limited exposure to emerging markets such as Russia and Brazil and that, despite signs of a slowdown in those markets, British businesses should not be deterred from building stronger links with them.

Forbes’s intervention, against the backdrop of a recovering UK economy, indicated that she is preparing to vote for rates to be raised from their current record low of 0.5%.

“Despite the doom and gloom sentiment, the news on the international economy has not caused me to adjust my prior expectations that the next move in UK interest rates will be up and that it will occur sooner rather than later,” she said in a speech on Friday.

Forbes conceded that if some of the potential risks to emerging markets play out – such as a sharper than expected slowdown – “then the UK economy is unlikely to be immune”. But she said the UK’s exposure “appears manageable”.

Her comments align her with fellow rate-setter Ian McCafferty, who has voted for higher rates at recent policy meetings, where the MPC has split 8-1 at recent gatherings in favour of holding rates steady. But the Bank’s chief economist, Andy Haldane, said last month that rates may have to be cut further given signs of a slowdown in the UK and risks to the global economy from China.

The newest member of the nine-person MPC, Jan Vlieghe, also left the door open to an interest rate cut this week when questioned by MPs. Highlighting low inflation, Vlieghe told parliament’s Treasury committee that there was an option to cut rates but that the next move was “more likely to be up than down”.

Forbes, a US economics professor, said that on emerging markets, “recent negative headlines merit a closer look”.

“After considering the actual data and differences across countries, the actual news for this group is much more balanced (albeit not all bright),” she said in her speech, entitled “growing your business in the global economy: Not all doom and gloom”.

She was speaking a week after the International Monetary Fund warned central bankers that the world economy risks another crash unless they continue to support growth with low interest rates.

Forbes referred to the IMF’s latest downgrade to global growth prospects but noted that the fund had left its China forecasts unchanged. The data from China “has not yet weakened by anything close to what the gloomy headlines imply”, she added.

More broadly, she felt the global outlook was also better than headlines suggested.

“Although the risks and uncertainties in the global economy have increased, the widespread pessimism is overstated,” Forbes said.

She told business leaders that they should not be deterred from trading with emerging markets by the recent negative news, which “should prove temporary”.

“UK companies – as a whole – have been slow to expand into emerging markets. This may provide some stability over the next few months if the heightened risks in some of these countries become reality. But when viewed over a longer perspective, this limited exposure to emerging markets has caused the UK to miss out on growth opportunities in the past,” Forbes said.

UK interest rates were slashed to shore up the economy during the global financial crisis and they have stayed at a record low for more than six years. With inflation below zero and headwinds from overseas, economists do not expect a rate hike until well into next year.

In the US, interest rates are also at a record low of near-zero. Policymakers had been signalling they could start hiking last month but then worries about China’s downturn prompted them to wait. Still, the Federal Reserve chair, Janet Yellen, recently said the current global weakness will not be “significant” enough to alter the central bank’s plans to raise rates by December.

Forbes was also optimistic that the UK could weather the turmoil and said its domestic-led expansion “shows all signs of continuing, even if at a more moderate pace than in the earlier stages of the recovery.””

Howard Archer, an economist at the consultancy IHS Global Insight, said Forbes’ remarks reinforced the picture of a wide range of views on the rate-setting committee.

“The current wide range of differing views within the MPC highlights just how uncertain the outlook for UK interest rates is – although it still seems to be very much a question of when will the Bank of England start to raise interest rates rather than will they,” he said.

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Britain’s jobless rate has dropped to levels not seen since 2008, but wage growth has slowed a little. UK unemployment rate falls to 5.4%. Basic pay growth dips to 2.8%. Germany trims economic growth forecast, blaming weakness in China…

 

Powered by Guardian.co.ukThis article titled “UK unemployment rate hits seven-year low of 5.4% – live” was written by Graeme Wearden (earlier) and Julia Kollewe (now), for theguardian.com on Wednesday 14th October 2015 12.26 UTC

The bank earnings season is in full flow on Wall Street. Bank of America made a quarterly net profit of $4.1bn in the third quarter, compared with a loss of $470m a year ago (which was caused by massive mortgage-related costs). The second-biggest US bank beat analysts’ forecasts, despite falling revenues. Chief executive Brian Moynihan has been reducing costs, by slashing jobs and restructuring the business.

The bank, which has paid more than $70bn in legal expenses since the height of the financial crisis in 2008, said its legal costs fell for the third quarter in a row, to $231m from $6bn a year earlier. Revenues, however fell by 2.4% to $20.9bn, with the bank pointing to turbulent markets.

Moynihan said:

The key drivers of our business – deposit taking and lending to both our consumer and corporate clients – moved in the right direction this quarter and our trading results on behalf of clients remained fairly stable in challenging capital markets conditions.”

Goldman Sachs is due to report its quarterly results on Thursday at lunchtime, followed by Citigroup.

Updated

Germany trims growth forecast

Germany has trimmed its growth forecast for this year, blaming weakness in China and other major emerging economies. Economy minister Sigmar Gabriel said Berlin now expects the German economy to grow by 1.7%, down from the 1.8% predicted in April. Next year’s forecast was left unchanged at 1.8%.

Gabriel said the emissions-rigging scandal at Volkswagen, which has led to fears that the “Made in Germany” brand could be damaged, “has no enduring effect” on current economic forecasts.

He also said that money being pumped into education to help cope with the influx of refugees into Germany could work “a bit like a stimulus programme” starting next year.

Gold hits 3 1/2 month high, stock markets and dollar down

Let’s take a look at the markets. Gold prices have hit 3 1/2 month highs as concerns over weak inflation and growth in China reinforced expectations that the long-awaited US interest rate hike is still some way off.

The Fed surprised markets when it left rates unchanged at its September meeting, citing concerns about the global economy, but Fed chief Jane Yellen subsequently said the central bank was on track to increase borrowing costs later this year. However, there are signs of divisions within the Fed: Daniel Tarullo, a member of the Fed’s board of governors, told CNBC on Tuesday that it would not be “appropriate” to raise rates this year.

Spot gold rose to $1,176.20 an ounce earlier, its highest level since the end of June.

Stock markets have slipped for a second day and the dollar slid to its lowest level in nearly a month after fresh signs of a slowdown in the Chinese economy.

The FTSE 100 index is down 0.6% at 6306.45, a fall of more than 35 points. Germany’s Dax has also lost 0.6% while France’s CAC has slipped 0.3%.

German utility E.ON has clinched a $1.6bn deal to sell its Norwegian oil and gas business to Russian billionaire Mikhail Fridman. Norway’s oil and energy minister said the deal will be handled like another other – despite EU sanctions against Russia, which were imposed over the Ukraine crisis. Norway is not a member of the European Union.

Tord Lien said in a statement sent to Reuters:

An application for such an approval will be handled the usual way. The restrictive measures apply to activities in Russia. That international firms wish to invest on the Norwegian continental shelf is good.”

Mikhail Fridman, chairman of Alfa Group.

Mikhail Fridman, chairman of Alfa Group. Photograph: Sergei Karpukhin / Reuters/REUTERS

Shares in E.ON turned positive on the news and are now trading up 2.6%.

Fridman’s LetterOne fund had emerged as the frontrunner to buy the German company’s Norwegian North Sea assets after the billionaire, who is of Ukrainian descent, was forced to sell his British North Sea assets due to the western sanctions.

Updated

The Institute for Public Policy Research has looked at the regional disparities in the UK labour market. The think tank’s new chief economist, Catherine Colebrook, said:

The latest data suggests the economy is continuing to create jobs, with the employment rate at a new high, and unemployment at its lowest level since 2008.

However, a closer look at the data suggests weaknesses remain: there are big regional disparities, with the employment rate in the North East a full 10 percentage points lower than that in the South West.

And inactivity across the UK remains high, at just over a fifth of the working-age population. The government will have to tackle these weaknesses if it is to succeed in creating two million more jobs over the next five years.”

Here’s Heather Stewart on today’s jobs report:

Summary: jobless down, employment at record high

Here are the main points from today’s labour market report, covering June to August 2015 (you can scroll back to 9.30am for full coverage)

  • There were 31.12 million people in work, 140,000 more than for March to May 2015 and 359,000 more than for a year earlier.
  • There were 22.77 million people working full-time, 291,000 more than for a year earlier. There were 8.35 million people working part-time, 68,000 more than for a year earlier.
  • The employment rate (the proportion of people aged from 16 to 64 who were in work) was 73.6%, the highest since comparable records began in 1971.
  • There were 1.77 million unemployed people (people not in work but seeking and available to work), 79,000 fewer than for March to May 2015 and 198,000 fewer than for a year earlier.
  • There were 970,000 unemployed men, 125,000 fewer than for a year earlier. There were 803,000 unemployed women, 73,000 fewer than for a year earlier.
UK labour market
  • The unemployment rate fell to 5.4%, lower than for March to May 2015 (5.6%) and for a year earlier (6.0%). It has not been lower since March to May 2008. The unemployment rate is the proportion of the labour force (those in work plus those unemployed) who were unemployed.
  • There were 9.01 million people aged from 16 to 64 who were economically inactive (not working and not seeking or available to work), little changed compared with March to May 2015 but down slightly (13,000) compared with a year earlier.
  • The inactivity rate (the proportion of people aged from 16 to 64 who were economically inactive) was 22.1%, little changed compared with March to May 2015 and with a year earlier.
  • Comparing June to August 2015 with a year earlier, pay for employees in Great Britain increased by 3.0% including bonuses and by 2.8% excluding bonuses.

The full report is online here (as a pdf).

Updated

The CBI, which represents Britain’s businesses, has welcomed today’s labour market report – and implicitly criticised George Osborne’s new National Living Wage:

Matthew Fell, CBI interim chief policy director, says:

“We’re encouraged by businesses creating more jobs, leading to rising employment. It’s also good to see falling unemployment, particularly among those out of work for more than one year dropping by 44,000.

“While we want to see higher pay growth, this must go hand in hand with increases in productivity. It’s crucial that the Low Pay Commission retains autonomy over future National Living Wage rises to avoid unnecessary political interference and help boost jobs.”

Last month, outgoing CBI chief John Cridland warned that raising the minimum wage to £9 an hour by 2020 was “a gamble” that could cost jobs.

Resolution Foundation: Pre-crisis pay packets still far away

Workers in Britain’s financial sector are closest to seeing their real pay hit pre-crisis levels, according to the Resolution Foundation.

The thinktank also flags up that construction workers’ wage packets are lagging far behind.

This chart shows how real wages (pay rises minus inflation) began to fall when the financial crisis struck.

UK wage data

UK wage data Photograph: The Resolution Foundation

Matthew Whittaker, chief economist at the Resolution Foundation, explains:

“It’s encouraging to see unemployment falling again, after a pause earlier this year. But there is significant variation in the extent to which this jobs revival has been shared across the country. Many parts of the UK remain a long way short of their pre-recession levels.”

“Private sector employees are enjoying a mini pay surge that is helping to narrow the substantial wage gap that opened up after 2008. However, maintaining this momentum will prove much harder once inflation starts heading back towards its target rate next year.

Whittaker also fears that the public sector pay cap will lead to problems:

“As recovery builds, attention will turn to who is benefiting from it. The strong recent performance of wages in the low-paying retail sector is encouraging, but the picture is much less promising in manufacturing and construction. Meanwhile, ongoing pay constraint in the public sector is likely to translate into increasing recruitment and retention difficulties in the coming months.”

German bank Berenberg have produced a chart showing how real wage growth (adjusted for inflation) has picked up as the jobless rate has fallen:

UK wages

UK wages Photograph: Berenberg

Kallum Pickering, Berenberg’s senior UK economist, explains:

Falling unemployment is boosting wages! The risk that low inflation might hamper growth in wages now looks misplaced, with wage data continuing to show stable progress (see chart 1) despite weak headline inflation. The pace of real wage growth is now broadly consistent with the pre-crisis average, though unemployment is still around 0.3pp higher.

Our view is that the labour market still has some more progress to make before the unemployment rate finally settles. This further improvement however, is unlikely to bring about further real wage gains. Further slack erosion in the labour market will be consistent with higher nominal wages but, it will take place as inflation recovers.

Today’s labour market report also shows how Britain and the US benefitted from massive monetary stimulus programmes after the financial crisis struck:

UK unemployment stats

Many public sector workers are missing out on the recent increase in wages, because chancellor George Osborne has enforced a 1% pay rise freeze that could last until 2019.

Perhaps someone should remind the Department of Work and Pensions….

Updated

Britain’s economic productivity is still below its potential, warns Ian Brinkley, chief economic adviser at Lancaster University’s The Work Foundation.

Brinkley says:

“The employment growth pause that we saw in the first half of 2015 is over – job growth resumed over the three months to August compared with the previous three months, driven by more young people and older workers in employment.

Looking ahead, we can expect productivity to grow faster and employment to grow more slowly than they have in recent years as the labour market starts to return to normal. But a full recovery in productivity could be long and slow. Even with the recent boost we are still 15 per cent below where we would have been had the pre-recession productivity trend continued, and manufacturing productivity still gives serious cause for concern.”

Around four-fifths of the 359,000 jobs created last year are full time:

Part time/full time work

The fall in the jobless rate indicates there’s little slack in the UK labour market, which could mean borrowing costs rise in early 2016.

Dean Turner, Economist at UBS Wealth Management, explains:

Rising wage pressures will likely prompt the Bank of England to hike interest rates soon, most likely in the first quarter of next year.

However, tighter monetary policy is unlikely to derail the UK from its current growth trajectory, as nascent signs productivity growth should keep inflation pressures in check, the consequence being that the path of rate increases will be gradual.”

Wages have been rising this year because companies are managing to increase their productivity, argues economist Howard Archer of IHS Global Insight.

He says:

One factor that seems to be limiting employment growth compared to earlier in 2015 is that UK productivity is now seeing genuine improvement – with earnings growth stronger, UK companies are likely stepping up their efforts to lift productivity by getting more out of their existing workers.

Public sector keeps shrinking

Britain’s public sector workforce has shrunk again to just 17.2% of the working population, the lowest since records began in 1999.

UK unemployment

Today’s labour market report shows that there were 5.36 million people employed in the public sector for June 2015. This was:

  • down 16,000 from March 2015
  • down 59,000 from a year earlier
  • the lowest figure since comparable records began in 1999

In contrast, there were 25.74 million people employed in the private sector for June 2015. This was 58,000 more than for March 2015 and 472,000 more than for a year earlier.

Here’s where jobs were created, or destroyed, in the last year:

UK unemployment

After several years of suffering falling real wages, British pay packets have now been outpacing inflation for the last year or so.

Chancellor George Osborne likes the look of today’s figures:

My colleague Andrew Sparrow is covering all the drama around the fiscal charter vote in his Politics Live blog:

The number of people claiming jobless benefits appears to have bottomed out just below 800,000, with the claimant count rising by 4,600 last month.

Claimant count

Claimant count Photograph: ONS

Basic pay growth slows

Wage growth continues to outpace inflation, but not by as much as expected.

Basic pay, excluding bonuses, rose by 2.8% annually in the three months to August. That’s a slight fall compared to the 2.9% recorded a month earlier. Economists had expected a rise to 3%.

Total earnings, including bonuses, did increased by 3%.

UK wage growth

UK wage growth Photograph: ONS

UK inflation actually fell by -0.1% last month, so this means real wages are rising by around 3%.

Updated

Britain’s employment rate has risen to 73.6%, the highest since comparable records began in 1971.

UK employment rate

UK jobless rate falls to 5.4%

Here we go! Britain’s jobless rate has hit a new seven year low, falling to 5.4% in the three month to August.

The Office for National Statistics reports that the number of people out of work fell by 79,000 in the last quarter, taking the jobless total down to 1.774 million.

But the claimant count – the number of people claiming unemployment benefit – has risen by 4,600 in September. That takes the total to 796,000. That has dashed predictions of a small fall in the claimant count.

More to follow….

Updated

Updated

UK government urged to reintroduce compulsory work experience

Pupils wearing school uniform in a secondary comprehensive school , Wales UK<br />CYA7MC Pupils wearing school uniform in a secondary comprehensive school , Wales UK

Ahead of today’s unemployment report (at 9.30am BST), the British Chambers of Commerce has urged the government to reintroduce compulsory work experience for school children.

BCC director general John Longworth believes it was a mistake to stop forcing schools to offer work experience for under 16-year-olds three years ago. It would help bring down Britain’s ‘stubbornly high’ youth unemployment rate, and help young people make the jump to the workplace.

Longworth says:

“Business and school leaders are clear – we won’t bridge the gap between the world of education and the world of work unless young people spend time in workplaces while still at school.

“It was careless of Government to end compulsory work experience in 2012, but it is not too late to correct the mistake and work with companies and schools to ensure that every school pupil has the chance to feel the energy, dynamism, buzz and challenge of the workplace for themselves.

Work experience is a touchy subject in the UK; those with good contacts typically get a head start at bagging the best placements. Still, even a week painting fences at a duck sanctuary can lead (eventually) to a desk in the newsroom….

Updated

Tony Cross of Trustnet Direct agrees that today’s weak China inflation figures, and fresh deflation at the factory gate, are a worry for traders:

Downbeat data from China – this time in the shape of weaker than expected inflation – is adding another layer of concern as to how the world’s second largest economy is managing the slowdown, and as a result the base metal mining stocks once again are wearing more than their fair share of the losses.

Here’s the picture across Europe:

European markets, October 14 2015

Domino’s Pizza, cheese and tomato pizza

Pizza chain Domino’s is bucking this morning’s selloff.

Domino’s shares have jumped by 13% to a record high of £10.14, after it raised its profit forecasts and revealed that UK like-for-like sales are up by a remarkable 14.9% in the 13 weeks to September 27.

CEO David Wild credited “the success of our strategic and marketing initiatives”; the company is strong on social media, has a successful smartphone app, and has sponsored several popular TV shows from The Simpsons to Hollyoaks.

Updated

Germany’s DAX and France’s CAC are both down around 1%, adding to losses earlier this week.

Bloomberg TV’s Carolyn Hyde flags up that more than 100 billion euros has been knocked off Europe’s largest companies value this week already:

VIEW FROM CANARY WHARF TOWER ON CITY OF LONDON SKYLINE AND RIVER THAMES, LONDON, UK

Stock markets across Europe are in the red at the start of trading, and China is getting the blame.

The FTSE 100 has dropped by 55 points, or 0.85%, in early trading to 6288.

Mining stocks are all down, with Glencore dropping 2.5% and Anglo American shedding 2.3%.

Burberry is also leading the fallers, down 2%. The fashion firm is expected to report slowing sales on Thursday, due to sliding demand for its trench coats and natty checks in China.

Mike van Dulken, head of research at Accendo Markets, says today’s Chinese inflation figures are a worry for investors:

While Chinese consumer inflation (CPI) slowed further, Producer Prices made it a record 43rd straight month of deflation.

While inflation gives the People’s Bank of China room to ease monetary policy further to support the slowing economy, hopes of more stimulus are clearing failing to appease market concerns especially with Q3 GDP data only days away

Chinese policymakers may get another nudge to stimulate their economy next Monday, when GDP figures for the third quarter are released.

Growth is expected to slow to an annual rate of 6.8%, from 7.0% in the second quarter of this year. That would be the first sub-7% reading since the financial crisis.

August and September were turbulent times for China, with wild swings in the stock market. That could also hit the growth rate, if worried firms started cutting investment.

European markets are expected to fall this morning, following the weak Chinese inflation data overnight:

Chinese deflation fears as producer prices slide again

New fears over China’s economy are rippling through the markets this morning, after two piece of economic data showed that demand is weakening.

The producer prices index – which measures what Chinese firms charge for their goods – slumped by 5.9% year-on-year in September. That matches August’s decline, which was the biggest drop since the financial crisis in 2009.

It’s also the 43th month running in which producer prices have fallen.

It suggests that companies are being forced to slash prices in an attempt to stimulate sales, as Beijing tries to rebalance its economy without a ‘hard landing’.

Consumer price inflation also fell, with the CPI index dropping from 2% in August to 1.6% in September, partly due to slowing food prices

And that hit markets in Asia, with traders worrying that the Chinese economy is in urgent need of fresh stimulus.

As Chris Green, an Auckland-based strategist at First NZ Capital Ltd, told Bloomberg:

“In terms of global growth, the risk is skewed towards the downside.”

Angus Nicholson of IG reckons Beijing will act soon, saying:

Today’s Chinese CPI essentially guaranteed further cuts to the interest rate and the reserve requirement ratio (RRR) before the year is out.

But right now, all the Asian markets are in the red – with Japan’s Nikkei closing down almost 2%.

Asian stock markets

Asian stock markets today. Photograph: Thomson Reuters

Updated

Introduction: UK unemployment report in focus

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

Coming up this morning…

The latest UK unemployment report, due at 9.30am BST, will show whether or not Britain’s labour market recovery lost pace over the summer.

The jobless rate is expected to remain at 5.5%, while the number of people claiming unemployment benefit is tipped to fall by around two thousand.

The latest UK earnings figures will also be closely scrutinised. Last month, we saw that wages were rising at their fastest rate in six years, at 2.9% year-on-year. Some in the City predict they will have risen again to around 3.1%.

Michael Hewson of CMC Markets explains:

Today’s average earnings data could present Bank of England policymakers with a problem in the short term if they continue to trend higher as they have been doing for the past few months.

Expectations for the three months to August are for an increase in wages to 3.1% from 2.9%, giving a further boost to hard pressed consumers who up until a year ago had undergone a five year fiscal squeeze in the other direction. The main concern would be if wages start to push higher in a wage/price spiral but that doesn’t seem likely at this point in time

We also get a healthcheck on the eurozone at 10am BST, when the eurozone industrial production figures for August are released. Economists expect a fall in output, as we’ve already seen weak data from Germany for that month.

And over in Greece, European commissioner Pierre Moscovici is visiting prime minister Alexis Tsipras to discuss the Greek bailout programme this afternoon.

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

Updated

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Rolling economic and financial news, from the latest wealth report to the UK inflation data. Credit Suisse wealth report released. German investor morale hit by VW scandal. UK inflation turns negative. Chinese imports tumble 20%…

 

Powered by Guardian.co.ukThis article titled “Richest 1% now own half of all wealth, says Credit Suisse – business live” was written by Graeme Wearden (until 2pm) and Nick Fletcher, for theguardian.com on Tuesday 13th October 2015 13.41 UTC

Wall Street opens lower

US markets have fallen back in early trading, along with other global markets in the wake of poor Chinese trade figures, which cast new doubt over the prospects for the world’s second largest economy.

The Dow Jones Industrial Average is down more than 90 points or 0.5%, while European markets are also still firmly in the red.

Markets fall

Markets fall. Photograph: Reuters/Reuters

After the Treasury Select Committee heard from the newest member of the Bank of England’s Monetary Policy Committee, Jan Vlieghe, who appeared in no hurry to vote for a rate rise, it was the turn of fellow rate-setter Ian McCafferty.

McCafferty was the only one of the nine-member monetary policy committee (MPC) to vote for a hike last week. Katie Allen reports:

McCafferty appeared less worried about the negative impact on the UK and the inflation outlook from a global economic slowdown.

“I place more weight on some of the upside domestic risks to to inflation over the three-year horizon,” McCafferty told MPs.

“It’s clear that we have seen UK wages pick up relatively smartly in nominal terms over the course of the last six months, to a rate that is higher then the MPC would have expected six or nine months ago.”

He also expects a tightening labour market will mean nonimal wage growth accelerates further over 2016 and 2017 and that is something that will only be offset to “some extent” by a pick-up in productivity growth. McCafferty described himself as not hugley optimistic about productivity growth improving.

McCafferty.

McCafferty. Photograph: Rex Features/Rex Features

Asked about the relative merits of using quantitative easing (QE) or changes in the Bank rate to influence the economy, McCafferty noted policymakers had more experience on Bnk rate. He also said he would like to see the Bank rate become an effective marginal instrument again. “Over time, I would like to see Bank rate get up to a point at which we could cut it again were we to need to do so were the economy to slow or inflation to dip below target.”

The latest official figures showed inflation dipped into negative territory in September, at a rate of -0.1%. But McCaffterty sought to reassure MPs “I do not think we are entering a form of deflation” and noted there were few signs of changes in consumer behaviour as a result of stagnant prices.

Asked whether the latest news on inflation might influence him, McCafferty said it would not.

Nor would the latest warning about weaker global growth from the International Monetary Fund.

“In isolation, those things would not on their own change my view of the last few months,” he said.

Dorsey’s promise of no “corporate speak” in his email to Twitter employees about the job cuts fell at pretty much the first hurdle:

Twitter announces job cuts

Over in California, Twitter has just announced plans to cut around 8% of its workforce.

Jack Dorsey hasn’t wasted much time since becoming CEO again. In a letter to staff, he says Twitter will “part ways” with up to 336 workers in an attempt to grow faster.

It’s a tough decision, Dorsey says, but necessary as “the world needs a strong Twitter”….

As usual, the sound of job cuts goes down well on Wall Street – Twitter shares have risen in pre-market trading.

Updated

David Drumm, former head of Anglo Irish Bank.

David Drumm. Photograph: Dan Callister / Rex Features/Dan Callister / Rex Features

One of the bankers blamed for the financial crash in Ireland due to over-lending to property speculators faces extradition from the United States later today.

David Drumm, a former senior figure in the now defunct Anglo Irish Bank, will appear in a court in Boston where he has been living in exile since the institution collapsed in 2009 and hundreds of millions of taxpayers money was spent to nationalise it.

An American judge will decide today whether his arrest at the weekend in Massachusetts at the weekend was lawful. If the judge rules it was then this will pave the way for Drumm’s extradition back to Ireland where he will face up to 33 criminal charges including seven counts of forgery and seven counts of falsifying documents.

Drumm’s re-appearance in the Irish media is a reminder on Ireland’s Budget Day of the bad old days before the crash and the international bail out when bankers loaned billions to property speculators which in turn dangerous overstretched not only key business figures in Ireland but also overheated the Republic’s economy.

Our economics editor, Larry Elliott, has taken a look at today’s UK inflation data, which showed prices were 0.1% cheaper in September than a year ago.

We haven’t seen such weak price pressure in the British economy for many decades, he points out:

This is going to be a record-breaking year for UK inflation. Not since the interwar period has upward pressure on the cost of living been as persistently weak as it has since the start of 2015.

But this is being driven by cheaper commodities, as emerging markets slow down.

The Bank of England is therefore confronted with a situation in which the inflation rate for goods is currently -2.4% while the inflation rate for services is +2.5%.

So what happens next? Larry reckons prices will pick up in 2016, pushing inflation back towards the 2% target. Unless the global economy sours….

Global rich are getting richer

The top 1% of wealth holders now own half of all household wealth.

And that includes 120,000 “ultra-high net worth individuals” across the globe who own at least $50m of wealth each.

That’s according to Credit Suisse’s latest wealth report, which is packed with details about the distribution of wealth across the globe.

This year’s report shows that China’s stock market boom has helped to create more ultra-rich people there. Chinese multimillionaires and billionaires make up 8% of all UHNWI’s.

The group of millionaires below the $50m mark make up another 0.7% of global population, but owns 45.2% of global wealth.

But while the ultra rich have got even richer, others aren’t keeping pace.

Credit Suisse’s chief executive Tidjane Thiam says:

Notably, we find that middle-class wealth has grown at a slower pace than wealth at the top end. This has reversed the pre-crisis trend, which saw the share of middle-class wealth remaining fairly stable over time.

Here are some charts from the report, which is online here.

Credit Suisse wealth report 2015
Credit Suisse wealth report 2015

The top slice of this pyramid group is made up of 34 million US dollar millionaires, who comprise less than 1% of the world’s adult population, yet own 45% of all household wealth.

Credit Suisse estimates that 123,800 individuals within this group are worth more than $50m, and 44,900 have over $100m.

Credit Suisse wealth report 2015
Credit Suisse wealth report 2015

Updated

BoE’s new policymaker: It’s not time to raise rates yet

Hedge fund manager Gertjan Vlieghe

Hedge fund manager Gertjan Vlieghe, who is joining Britain’s MPC Photograph: Gertjan Vlieghe

UK parliament’s Treasury Committee has been hearing from the newest member of the Bank of England’s rate-setting Monetary Policy Committee, Jan Vlieghe, and it appears he is in no hury to vote for a hike.

This is the first time financial markets are getting a chance to hear what the new MPC member thinks about the UK economy, the global outlook and what should come next for interest rates in the UK.

After the Bank’s chief economist, Andy Haldane, recently raised the prospect of a rate cut – from what is already a record low of 0.5% – in the face several risks to the economic outlook, Vlieghe too is not ruling out even lower borrowing costs.

He is worried about the Bank meeting its government-set target for inflation at 2% on the consumer prices index (CPI), which fell to -0.1% this morning.

Asked if the BoE had run out of tools, Vlieghe said “we can cut rates if we judge it necessary” and that the Bank could also re-start its asset purchase programme, also known as quantitative easing (QE).

But he did also say “the next move in interest rates is more likely to be up than down.”

Vlieghe highlighted what he saw as risks to the UK from China’s downturn and the wider global slowdown.

“Clearly, the UK is an open economy, it has very important trade and financial links to the rest of the world. The UK is in reasonably good shape, growth is solid but not fantastic.

But we absolutely have to take into account we are operating in a global environment which is adverse, so to speak, and it’s a headwind to growth and it is one of the things that will prevent, I think, the UK economy from accelerating meaningfully from the pace we are seeing currently.”

He set out some upsides and downsides in the current domestic situation.

The “headwinds” were:

  • A strong pound
  • That the UK is operating in a weak global environment
  • An ongoing fiscal headwind:

But on the plus side:

  • There had been some improvement to productivity growth
  • A housing market recovery
  • Some improvement in real wages

“What we are trying to judge is how these play off against each other,” Vlieghe added.
As for when he might vote for rates to go higher, after already more than six years at their record low, the former hedge fund economist highlighted a host of low inflation numbers from the core rate to people’s inflation expectations.

Speaking after official figures showed headline inflation turned negative in September, Vlieghe said other prices indicators too were “all a little bit below where you’d want them to be to be confident of meeting the 2% inflation target in the medium term”.

“We need them to rise… I am not confident enough right now that they will rise in order to vote for an immediate rate hike. I think we have time. We can wait and see how this plays out and I would want to see a more convincing broad-based upward trajectory before I say OK, now I am confident enough that we will get to 2% eventually and therefore vote for a rate rise.”

Despite the evidence of today’s ZEW survey, German economy minister Sigmar Gabriel has claimed the diesel emissions scandal at Volkswagen won’t permanently damage the German economy.

Asked whether the VW crisis would hit the economic outlook for Germany, Europe’s largest economy, Gabriel said:

“No, I don’t expect the problems at Volkswagen to have lasting effects on the German economy.”

It may be too early to be sure, though. Yesterday, Britain’s transport secretary said Volkswagen deserves to suffer “substantial damage” because of the diesel emissions scandal.

Patrick McLoughlin told MPs that:

“They have behaved in an appalling way,”

“These [defeat] devices were made illegal in 1998 and it is unbelievable to think a company the size and reputation of VW have been doing something like this. They are going to suffer very substantial damage as a result and they deserve to.”

Pre-election giveaways expected in Irish 2016 budget

Irish budget 2016<br />A child’s piggy bank with euro notes as Ireland’s Budget 2016 is to be announced today by Finance Minister Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin. PRESS ASSOCIATION Photo. Picture date: Tuesday October 13, 2015. Only weeks or months from the next general election the electorate is in line for a softening-up with sources in the coalition Government billing the limited restoration to pay packets as “family friendly”. See PA story IRISH Budget. Photo credit should read: Brian Lawless/PA Wire

For the first time in seven years an Irish budget will actually be giving away something for its citizens after the years of tax hikes, brutal spending cuts, the humiliation of an IMF-EU bail out and the crash of the Celtic Tiger.

Irish Finance Minister Michael Noonan will get to his feet after 2pm inside the Dail and deliver a budget that is expected to include:

  • An increase in €3 to the weekly Old Age Pension
  • Tax cuts for the average worker that are expected to put €1000 back into their pockets
  • A cut of to the hated Universal Social Charge tax which was brought in to help plug the gap in public finances during the bail out times.
  • A €550 tax credit for the self-employed
  • The promise of 20,000 new public homes taken from the portfolio of properties nationalised after the financial crash and the bankruptcies of property speculators. Increases in child benefits and a freeze on prescription charges.

Of course it is hardly a coincidence that the Fine Gael-Labour goverment are facing into an election year in 2016 and will no doubt face accusations from opposition parties of trying to bribe their way back into power. In return the coalition will argue that they have done the “heavy lifting” after four years in office, carried out the painful adjustment policies that restored the nation’s finances and oversaw growth in the economy, and managed an exit from the bail out.
One thing is for sure – Enda Kenny and his administration are going to wait for at least three months before today’s budget measures sink into the public’s consciousness. The Taoiseach has finally decided that he won’t call the election until late February/early March. The wisdom of that decision to go late rests an awful lot on the impact of today’s Budget 2016.

VW emission scandal hits German morale

german flag

The Volkswagen diesel emissions scandal and economic problems in emerging markets have become a toxic cocktail for confidence within Germany, new data shows.

Morale among German investors and analysts fell sharply in October, according to the ZEW think tank, pulling its economic sentiment index down from 12.1 to just 1.9.

ZEW President Professor Clemens Fuest pinned the blame on VW, and troubles overseas:

“The exhaust gas scandal of Volkswagen and the weak growth of emerging markets has dampened economic outlook for Germany.”

ZEW’s assessment of the current situation in Germany also fell, by 12.3 points to 55.2 points.

Despite that, Fuest reckons Germany will not fall back into recession.

For the survey, ZEW asked analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

VW to slash investment by €1bn/year

Over in Germany, Volkswagen has just announced that it is cutting its investment programme by €1bn per year, as it grapples with the fallout from the diesel emissions scandal.

In a statement just released, VW announced a range of changes including shifting all its diesel cars to cleaner exhaust emissions systems, and making the next generation of its Phaeton car run on electricity..

Dr. Herbert Diess, who runs Volkswagen’s Passenger Brand, says:

“The Volkswagen brand is repositioning itself for the future.

We are becoming more efficient, we are giving our product range and our core technologies a new focus, and we are creating room for forward-looking technologies by speeding up the efficiency program.”

Here’s the key points from VW’s new strategic plan:

  • Accelerated implementation of the efficiency program creates room for reorientation
  • Streamlined processes leverage further cost-saving potential, including cuts in fixed costs
  • Investments to be reduced by 1 billion euros per year compared with planning – combined with prioritization of projects for the future
  • • Product decisions formulated
  • • New Phaeton will be electric
  • • New Modular Electric Toolkit planned

Updated

Over in parliament, MPs are beginning to quiz former hedge-fund economist Gertjan Vlieghe about his appointment to Britain’s Monetary Policy Committee. You can see it here. It could be quite tasty, as explained earlier….

September’s inflation rate is used to calculate a range of benefits payments in the UK.

Consumer expert Paul Lewis reports that these payments will now be frozen, as will other payments linked to the headline inflation rate.

Updated

Britain’s return to negative inflation isn’t a great surprise or a great calamity, says Jeremy Cook, chief economist at the international payments company, World First:

He reckons inflation will pick up sharply in 2016, once the recent slump in oil prices fades into history.

Headline inflation has been pressured for nearly a year now from falling energy and commodity prices but we must remember that base effects will see that initial drop in oil prices fall out of the calculations in the coming months.

Howard Archer of IHS Global Insight also sees UK interest rates on hold for longer.

With inflation back below zero, it’s hard to see Britain’s interest rates rising from their current record low before 2016.

Peter Cameron, Associate Fund Manager at EdenTree Investment Management, explains:

“Inflation is back in negative territory again and it’s very unlikely that we’ll see the Bank of England raise interest rates this side of Christmas. Although wage pressures are emerging and the impact of the falling oil price will soon start to drop out of the numbers, a rate hike would have a deflationary effect by pushing up Sterling.

At a time when the ECB is signalling it is ready to expand QE and the Fed is likely to delay its own rate lift-off into 2016, the Bank will be fearful of allowing Sterling to appreciate too much.”

Updated

There’s no sign of deflation in the British housing market. New data shows that prices rose by 5.2% across the country in August:

Osborne: This isn’t damaging deflation

UK chancellor George Osborne insists that Britain is not entering a period of ‘damaging deflation’:

Deflation is a protracted period in which prices fall in a downward spiral, and people stop spending because today’s items are going to be cheaper tomorrow.

The bigger picture is of a broadly flat inflation rate since the beginning of the year, says Richard Campbell, head of CPI at the Office for National Statistics.

“The main downward pressures on CPI came from clothing, which rose more slowly this September than in recent years, and falling petrol and diesel prices.”

The three reasons why UK inflation is negative again

Clothing and footwear prices rose by 2.8% between August and September this year, compared to 4% between the same 2 months a year ago. That pushed the inflation rate down, to 0.1% in September.

Fuel prices fell by 2.9% between August and September this year compared with a smaller fall of 0.6% between the same 2 months a year ago.

The ONS says:

The largest downward contribution came from petrol, with prices falling by 3.7 pence per litre between August and September this year compared with a fall of 0.8 pence per litre between the same 2 months a year ago. Diesel prices are now at their lowest level since December 2009, standing at 110.2 pence per litre.

And a price cut by British Gas also helped cut the cost of living.

Over to the ONS again:

Gas prices fell by 2.1% between August and September this year, compared with no change between the same 2 months a year ago, with price reductions from a major supplier.

UK inflation, the detail, September 2015

Food and fuel have played a key role in dragging UK inflation down in the last year.

Over the last year, food prices fell by 2.5% and prices of motor fuels fell by 14.9%, according to the ONS.

This chart confirms that the UK’s inflation rate has been bobbing around zero for most of this year.

UK inflation

Clothing and fuel prices push inflation negative

Here’s the key points from today’s inflation report:

  • The Consumer Prices Index (CPI) fell by 0.1% in the year to September 2015, compared to no change (0.0%) in the year to August 2015.
  • A smaller than usual rise in clothing prices and falling motor fuel prices were the main contributors to the fall in the rate.
  • The rate of inflation has been at or around 0.0% for most of 2015.

UK in negative inflation again

Here we go! UK inflation has turned negative again!

The Consumer prices index fell by 0.1% in September, the Office for National Statistics reports. That’s weaker than the zero reading that economists had expected.

It’s the first sub-zero reading since April.

More to follow

Crumbs! The pound has just taken a dive in the foreign exchange markets, dropping almost one cent against the US dollar.

Pound vs dollar

Pound vs US dollar today Photograph: Thomson Reuters

Traders may be calculating that September’s UK inflation reading, due in a moment, is weaker than expected. Could the inflation number possibly have leaked??

Updated

More signs of weakness in Germany – Berlin is expected to trim its estimate for growth this year to 1.7%, down from 1.8%.

Economy minister Sigmar Gabriel could announce the new forecast tomorrow, according to Reuters.

This follows a hattrick of bad economic data last week, with factory orders, industrial production and exports all declining, as emerging market problems hit Germany.

Inflation, a preamble

Just 30 minute to go until we get the Britain’s inflation date for September.

City economists broadly expect that the consumer prices index will remain flat for a second month, leaving inflation at zero. But a negative reading can’t be ruled out.

My colleague Katie Allen explains:

Falling pump prices and a cut in energy bills by British Gas are expected to have kept inflation at zero last month, putting little pressure on the Bank of England to raise interest rates from their record low any time soon.

Official figures on inflation due at 9.30am are forecast to show no change in the consumer prices index measure. Against the backdrop of tumbling global commodity prices, from food to oil, inflation in the UK has been at or close to zero since February, well below the Bank’s target of 2%.

While some have described low inflation as a sign of economic fragility, it relieves the pressure on household budgets after several years of wages falling in real terms following the financial crisis. The latest official figures on the jobs market on Wednesday are expected to put pay growth at 3.1%.

Here’s her preview:

Hedge fund manager Gertjan Vlieghe

MPs could give Gertjan Vlieghe, Britain’s newest interest rate setter, a rough ride when he appears before them in an hour’s time.

Vlieghe should expect some tough questions about his previous role as economist at a hedge fund (Brevan Howard Asset Management).

Vlieghe was appointed to the Bank of England in late July. He had originally hoped to remain a member of Brevan Howard’s long-term incentive plan, but was forced to exit it to avoid “any mistaken impression” of a conflict of interest.

Alan Clarke, an economist at Scotiabank in London, reckons that those concerns may dominate today’s hearing — as Brevan Howard Asset Management (like any hedge fund) could potentially make or lose money due to decisions taken at the BoE.

Clarke told Bloomberg:

“It’s probably right that happens because financial markets have not had a great reputation recently. Sadly, I think, that will overshadow what is an otherwise great appointment.”

Bloomberg economist Maxime Sbaihi predicts that today’s ZEW survey, due at 10am BST, will show economic confidence deteriorated in Germany this month.

Mining stocks hit by Chinese gloom

European stock markets are all falling this morning, as the 20% slide in Chinese imports last month spooks traders.

In London, the FTSE 100 has lost 36 points, or 0.6%, led by mining stocks such as Glencore (-4.5%).

FTSE 100 fallers

FTSE 100 fallers Photograph: Thomson Reuters

The French CAC shed 1%, while Germany’s DAX is down 0.6%.

Conner Campbell of SpreadEX explains:

A whopping 20% fall in Chinese imports in September didn’t get the day off to the best start, with that drop in demand sure to cause ripples of worry the world over.

Updated

Shares in SABMiller have jumped by 9% at the start of trading in London, to around £39.50.

That’s short of the £44 per share proposal which its board have accepted; the City may not be 100% convinced that AB InBev will pull this deal off.

SAB Miller shares

SAB Miller shares this morning Photograph: Thomson Reuters

AB InBev now has until 5pm on the 28th October to file a firm offer for SAB, having won the board round with its latest proposal.

The key is whether Colombia’s Santo Domingo family, which owns 14% of SABMiller, feels £44 per share is enough.

Updated

You know a deal is big when it moves the pound.

Here’s how sterling reacted to the news that AB INBev and SABMiller have agreed terms.

Pound vs US dollar

Pound vs US dollar today Photograph: Thomson Reuters

Updated

AB InBev and SABMiller agree terms on £68bn deal

File photo of a waiter serving a glass of beer ahead of an Anheuser-Busch InBev shareholders meeting in Brussels<br />A waiter serves a glass of beer ahead of an Anheuser-Busch InBev shareholders meeting in Brussels in this April 30, 2014 file photo. SABMiller, the world’s second largest brewer, has promptly rejected an improved offer from bigger rival Anheuser-Busch InBev, saying October 7, 2015, that its 68 billion-pound ($104 billion) valuation was insufficient. REUTERS/Yves Herman/Files

One of the biggest takeover battles in the City in recent years is heading to a climax this morning.

Anheuser-Busch InBev, the brewing giant behind Stella Artois and Budweiser, has announced it has “reached an agreement in principle on the key terms of a possible recommended offer” for its rival, SABMiller (producer of Grolsch, Peroni, Pilsner Urquell…).

Here’s the statement issued to the City.

At £44 per share, the deal values SABMiller at around £68bn — making it the biggest takeover of a UK company ever.

It’s not signed and sealed yet, though – it still needs the support of SAB’s shareholders. Yesterday, SAB rejected £43.50 per share, but the board has now calculated that it can’t turn down this new higher offer.

More here:

Updated

The impact of China’s slowdown will be felt around the globe, warns economist Cees Bruggemans.

The 20% tumble in Chinese imports last month means that growth is continuing to slow, says Yang Zhao, China economist at Nomura Holdings Inc. in Hong Kong.

He said (via Bloomberg)

“Import growth remained sluggish, suggesting weakening domestic demand, particularly investment demand

We maintain our view that GDP growth will decline to 6.7 percent in the third quarter.”

GDP growth was measured at 7.0% in the second quarter of 2015.

Updated

Chinese imports slump 20% as slowdown continues

The latest trade data from China has sent a shiver through the markets this morning.

Chinese imports slumped by over 20% year-on-year in September (in dollar terms), a worse performance than economists had expected. That means imports have now fallen for 11 months running, as the country’s economy has slowed.

Exports dipped by 3.7% — better than the 6% slide which was expected. But it’s the slump in imports that is alarming analysts, as it hints at more problems building in China.

Reuters has more details:

Imports plunged 20.4% in September from a year earlier to $145.2bn, customs officials said, due to weak commodity prices and soft domestic demand.

These factors will complicate Beijing’s efforts to stave off deflation, one of the headwinds threatening the world’s second biggest economy.

The news helped to drive shares down in Asia, where Japan’s Nikkei fell over 1% overnight.

Commodity prices also weakened, as investors calculated that China would be importing less raw materials in the months ahead.

Updated

Introduction: Has UK inflation turned negative again?

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

After the glamour and drama of yesterday’s Nobel economics prize, we’re back into the gritty world of data this morning.

At 9.30am, the latest UK inflation figures for September could show that the cost of living is falling again (at least according to the Consumer Price Index).

It was 0% in August, mainly due to cheaper energy costs, and some economists think it could have fallen below zero last month.

Then at 10am, Germany’s ZEW economic sentiment index will highlight if the emerging market slowdown and the Volkswagen emissions scandal is hurting Europe’s largest economy.

Also coming up…

At 10am, MPs on the Treasury Select Committee will grill Gertjan Vlieghe, the newest member of the Bank of England’s monetary policy committee.

And the banking reporting season will kick off later, with results from JPMorgan Chase, Citigroup and Wells Fargo.

Updated

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Seven years following the banking crisis, senior bankers are still moaning about over-regulation, but with the government still owning major stakes in banks this is no time to water down the rules. This is not a normal state for the banking industry…

 

Powered by Guardian.co.ukThis article titled “The banking crash seven years on: it’s not yet business as usual” was written by Jill Treanor, for theguardian.com on Monday 12th October 2015 11.25 UTC

Seven years ago this week, Gordon Brown – the then prime minister – was in full combat mode. Royal Bank of Scotland (RBS) and HBOS were on the brink of collapse and risked bringing down the rest of the financial system with them. Brown was left with little option but to step in with billions of pounds of taxpayers’ money to act as a “rock of stability” to prevent the financial sector collapsing.

The intervening years have led to soul-searching through inquiries and changes in the rules about the amount – and type – of capital banks must hold to protect against collapse. Rules about the way bonuses are paid to top bankers have changed: deferral and payment in shares are now the norm for the most senior bankers. Changes are also being made to the way banks are structured following the recommendations by the Independent Commission on Banking, chaired by Sir John Vickers.

The government still owns 73% of RBS, down from 79%, and is yet to get rid of all its shares in Lloyds Banking Group, formed when HBOS was rescued by Lloyds TSB during the crisis. This is not a normal state for the UK banking industry.

Yet senior bankers are moaning about the difficulties their businesses face because of regulation. John McFarlane, the chair of Barclays, is again talking about national champions in investment banking. He raised it in July and again this week by suggesting that a merger of European investment banks (£) might allow a regional champion to be created to compete with US rivals.

Such remarks may help explain why, just a few weeks ago, Paul Fisher, a senior Bank of England official, issued a warning against watering down the post-crisis rules. “We probably won’t know for sure just how effective the new regime is until we reach another crisis. Meanwhile, we need to guard against the reforms being rolled back as a result of a period without crisis,” Fisher told an audience in London.

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A £500m rise in cars shipped abroad fails to ease prospects of huge UK trade deficit in third quarter fueled by strong pound plus eurozone woes and declining oil industry. The significant improvement seen in Q2 now considered as “only temporary”…

 

Powered by Guardian.co.ukThis article titled “Car exports cut monthly UK trade deficit but quarterly gap is growing” was written by Phillip Inman Economics correspondent, for theguardian.com on Friday 9th October 2015 11.47 UTC

A rise in car exports helped improve Britain’s trade deficit in August, according to official figures.

The monthly shortfall in the trade balance for goods narrowed to £3.3bn from £4.4bn in July. However, the UK was still heading for a huge deficit in the third quarter of the year after an upward revision to July’s shortfall.

Paul Hollingsworth, UK economist at Capital Economics, said: “Even if the trade deficit held steady in September, this would still leave the deficit in the third quarter as a whole at around £11bn, far higher than the £3.5bn deficit recorded in the second quarter.”

He said this suggests that net trade is probably making “a significant negative contribution to GDP” at the moment.

Hollingsworth warned that the strong pound and weakness in demand overseas as the US economy stuttered and the eurozone remained in the doldrums meant the government’s hopes of a significant rebalancing towards manufacturing exports would be dashed in the near term.

Alongside the £500m rise in car exports in August, the chemicals industry sent more of its production to the US, the ONS said. Total goods exports increased by 3.5% to £23.6bn in August 2015 from £22.8bn in July 2015.

But this positive news was offset by the continued decline in Britain’s oil industry, which has been a major factor holding back progress this year.

Lower production and the lower oil price have dented exports, and though oil imports are likewise cheaper, they continue to rise in volume.

The mothballing and subsequent closure of the Redcar steel plant could also have had an impact as the export of basic materials dived in August by more than 10%.

The services sector recorded an improvement in its trade balance, but the ONS pointed out that the UK continued to rely heavily on the financial services industry to pay its way in the world.

Figures for the second quarter showed that the surplus on trade in services was £22.8bn, of which almost half – £10.1bn – was contributed by banks, insurers and the fund management industry.

David Kern, chief economist at the British Chambers of Commerce, said the narrowing of the deficit in August was welcome, but taking the July and August figures together pointed towards a deterioration.

“This confirms our earlier assessment that the significant improvement seen in the second quarter was only temporary.

“The large trade deficit remains a major national problem. This is particularly true when we consider that other areas of our current account, notably the income balance, remain statistically insignificant.”

Kern urged the government to adopt measures that will “secure a long-term improvement in our trading position”.

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The developed nations have lately got away with throwing vast amounts of Quantitative Easing money into the system only because the results have not yet come home to roost;  but once more other people are paying the price…

Powered by Guardian.co.ukThis article titled “Quantitative easing and common sense” was written by Letters, for The Guardian on Wednesday 7th October 2015 18.34 UTC

Zoe Williams (It’s fine to print money, so long as it’s not for the people, 5 October) raises an important question about quantitative easing (QE). In the wake of the global financial crisis, it was adopted by the Bank of England. Capital markets had ceased to function. The banking system was in deep crisis. In the US and Britain, governments were driven to inject equity into the collapsing banking system. These huge outlays had to be funded by the issuance of public debt. The Bank made clear to the prime brokers (mainly the major commercial banks) that they would be offered access to zero-cost funds in order to bid in Treasury auctions. These funds were provided electronically by the Bank into the accounts of those banks held with it.

These no-cost credits enabled the prime brokers to purchase the government debt, and by agreement swap back the debt to the Bank at a modest profit. Once this happened, the electronic advances made by the Bank were cancelled. The net effect was threefold. First, the government’s solvency was preserved. Second, the prime brokers were able to secure profit from guaranteed transactions to replace more traditional forms of lending. Third – the odd bit – the Bank ultimately ended up holding the debt of the British government, not the private sector of the economy.

This reveals the “efficient secret” of central banking. The Bank is effectively financing the state through the indirect purchase of government debt. Zoe Williams asks the question: why can’t this “mechanism” be used to finance other major projects? The answer is that it could. QE involves little or no monetary expansion. It has no inflationary consequences. But these matters are not widely understood. Time for a reasoned debate on the merits of its wider use in these most unusual times.
Richard Tudway
Centre for International Economics

• Zoe Williams says “all money is created from nowhere”. She is talking through her hat. The basis of money, which is gold or, in some cases, other commodities (mainly metals) is as founded in the real world as any other product. To find, mine, refine and distribute gold requires vast amounts of human labour, which is why it is valuable – all value coming from the labour embedded in something.

Paper money and credit is simply a claim on real money, a paper or electronic token which saves carrying around bags of gold and it runs back to real money eventually. Issuing more tokens than there is gold is a large part of credit and banking, relying on everyone not turning up at the same time to claim it. It has a place and helps the world economy spin round, but detach it too far from real value (print too much) and it starts to create problems – like raging inflation, bank defaults etc.

When Richard Nixon took the dollar off the gold standard, the US was effectively bankrupt, surviving only by devaluing its debts and reneging on the agreed price for its imports. It has continued doing so ever since. Someone pays the price, and that is the developing world mainly. And eventually it collapses anyway, like it did in 2008.

The capitalist world has lately got away with throwing vast amounts of QE into the system only because the results have not yet come home to roost; but once more other people are paying, such as the Greek workers, the Middle East and, above all, China soaking up the paper money.

It cannot go on much longer. Even the Guardian routinely points out the imminence of further crisis. So, no, more of the same, however it is directed, solves nothing.
Don Hoskins
Economic and Philosophic Science Review

• How refreshing to read some common sense on macroeconomic policy. As long ago as 1948, Dudley Dillard (The Economics of John Maynard Keynes) was saying similar things: “Is there any necessity for subsidising the commercial banks by paying them huge amounts of interest to create the new money which is required for economic expansion? Is not the creation of new money properly a government function?” He clearly advocates “people’s QE”, though it is not called that. To the extent that there are underemployed resources and supply is responsive, it should not be inflationary.
John Levi
(Retired economics lecturer), Abingdon, Oxfordshire

• Zoe Williams’ article about printing money which does not grow on trees reminds me of an incident that took place in my university days. On a family visit to Cambridge, I had seen some rather expensive books which would help my studies. Over a cup of tea, I asked my father (a fruit grower, who specialised in apples) if he would kindly buy them for me. He replied that he had no money. “You must have,” I said. “You have just sold a whole cold store of apples.” He indignantly exclaimed: “Apples don’t grow on trees, you know.” I got my books.
Gillian Caddick
Peterborough, Cambridgeshire

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German factories suffer in August. VW is preparing to scrap non-essential spending as it battles with the emissions scandal. VW boss: “This won’t be painless”. Non-essential VW investment in doubt. Institute of Directors demand early EU vote…

 

Powered by Guardian.co.ukThis article titled “Volkswagen prepares for ‘painful’ changes; German factory orders slide – business live” was written by Graeme Wearden, for theguardian.com on Tuesday 6th October 2015 12.40 UTC

America’s trade gap has hit a five-month high, in another sign that global economic growth may be weakening.

US imports rose by 1.2% in August, fuelled by a 3% increased in purchases from China.

But exports shrank by 2%, to their lowest point since October 2012. That indicates weakness in key markets such as emerging nations and Europe. It could also reflect the impact of the stronger US dollar, which has gained against other currencies.

This drove the US Trade Deficit up to $48.33bn in August, up from $41.81bn a year ago.

The VW scandal hasn’t hurt the UK auto industry yet – car sales hit an all-time high in September, according to new data today.

Petrol-powered cars saw the strongest demand; suggesting some consumers might be more wary about diesel now.

Updated

Volkswagen boss: Painful changes are ahead

A VW employee enters the Volkswagen factory site through Gate 17 in Wolfsburg, Germany, Oct. 6, 2015. For Volkswagen, the cost of its cheating on emissions tests in the U.S. is likely to run into the tens of billions of dollars and prematurely end its long-sought status as the world’s biggest carmaker. (Julian Stratenschulte/dpa via AP)

A VW employee arriving at the Wolfsburg factory today. Photograph: Julian Stratenschulte/AP

Workers at Volkswagen have been warned to expect painful changes as the German carmaker tackles the emissions scandal.

New CEO Matthias Müller told staff that non-essential investments will be delayed or abandoned as it wrestles with the crisis.

Müller told today’s meeting in Wolfsburg that:

“Technical solutions to the problems are within view. However, the business and financial consequences are not yet clear”.

“Therefore we are putting all planned investments under review. What is not urgently needed will be scrapped or delayed”.

“And therefore we will adjust our efficiency programme. I will be very open: this won’t be painless.”

Muller’s warning came after works council boss Bernd Osterloh predicted that bonus payments to workers are now at risk too.

Updated

Our Katie Allen confirms that Britain’s directors do not march on an empty stomach, or an environmentally friendly one….

Update: IoD delegates have now plonked themselves outside in the sun — making a nice photo for visiting tourists.

Updated

Delegates at the Institute of Directors’ conference are tucking into their legendary lunchboxes — a chance to refuel after a morning discussing weighty topics like Europe and migration.

There’s an astonishing amount of packaging on display too — here’s a photo of just one box:

Perhaps Britain’s new tax on plastic bags should be extended? £10 per plastic lid might cover it….

Here’s a couple of photos of Volkswagen staff arriving in Wolfsburg, where they were briefed on the emissions crisis today:

Volkswagen<br />06 Oct 2015, Wolfsburg, Germany --- VW employees enter the Volkswagen factory site through Gate 17 in Wolfsburg, Germany, 06 October 2015. Photo: JULIAN STRATENSCHULTE/dpa --- Image by © Julian Stratenschulte/dpa/Corbis

VW employees enter the Volkswagen factory site through Gate 17 in Wolfsburg, Germany. Photograph: Julian Stratenschulte/dpa/Corbis
Volkswagen<br />06 Oct 2015, Wolfsburg, Germany --- VW employee Birgit Schuettke shows off an IG Metall shirt written with ‘One Team. One Family.’ at the end of the works assembly at Gate 17 at the Volkswagen factory in Wolfsburg, Germany, 06 October 2015. Photo: JULIAN STRATENSCHULTE/dpa --- Image by © Julian Stratenschulte/dpa/Corbis

Volkswagen employee Birgit Schuettke shows off an IG Metall shirt written with ‘One Team. One Family.’ at the end of the works assembly at Gate 17. Photograph: Julian Stratenschulte/dpa/Corbis

Brewing firm SABMiller has turned down an ‘informal offer’ from rival Anheuser-Busch InBev, according to a Bloomberg newsflash.

That’s sent SAB’s shares down 3%, to the bottom of the FTSE 100 (budge up, Glencore!).

This come three weeks after AB INBev, which brews Stella Artois and Budweiser, approached SAB, whose brands including Grolsch and Peroni.

Any deal would be huge, creating a new company worth perhaps $250bn (£160bn).

AB InBev has just a week to make a firm bid or walk away, so it’s not Last Orders in this story, yet.

The works council boss at Volkswagen, Bernd Osterloh, has told staff that the company will have to review all its investments following the emissions crisis.

He also predicted that their pay packets will suffer too.

Osterloh gave the warning at today’s staff meeting in Wolfsburg (see earlier post)

Reuters has the story:

All investments at Volkswagen will be placed under review, the carmaker’s top labour representative said on Tuesday, as the embattled German group grapples with the fallout of its diesel emissions scandal.

“We will need to call into question with great resolve everything that is not economical,” Bernd Osterloh, head of VW’s works council told more than 20,000 workers at a staff gathering in Wolfsburg, Germany.

The scandal is not yet having consequences for jobs at VW, which employs 60,000 people at its main factory, but will impact earnings at the core autos division as well as bonus payments to workers, Osterloh said.

VW: eight million cars sold in EU with cheat software

Volkswagen Wrestles With Diesel Emissions Scandal<br />BERLIN, GERMANY - OCTOBER 06: The Volkswagen logo is visible under coloured lights on the front of a Volkswagen Passat 2.0 turbodiesel passenger car affected by the Volkswagen diesel emissions software scandal on October 6, 2015 in Berlin, Germany.

Volkswagen has revealed that it sold eight million cars with defective emissions testing software across Europe.

It made the admission in a letter to German MPs, dated last Friday.

That’s the bulk of the 11 million cars affected, including almost 500,000 in the US.

We already know that 1.2m cars sold in the UK contained software to beat emission tests, plus 2.8m in Germany.

Updated

Looks like Lord Lawson got the last blow in:

They’re still arguing…

Lawson and Mandelson on Europe

Back at the IoD conference, Nigel Lawson and Peter Mandelson are having a brisk exchange of views over Britain’s membership of the EU (Lord M is pro, Lord L is con).

Katie Allen is impartial, and tweeting the key points from the Albert Hall:

Mining shares are leading the fallers in London this morning.

The 1.8% drop in German factory orders in August isn’t helping the mood.

Investors are concerned that falling demand from emerging markets could increase the raw materials glut, which has already driven commodity price down to multi-year lows.

Biggest fallers on the FTSE 100, October 05 2015

Biggest fallers on the FTSE 100 this morning. Photograph: Thomson Reuters

Updated

The Institute of Directors’ chief is also rebuking UK politicians for playing the migrants card:

Business leaders demand early EU referendum

Over at London’s Royal Albert Hall, business leaders are gathering for the annual Institute of Directors convention.

The 2,000 or so delegates will be hearing first from IoD head Simon Walker. As we reported this morning, Walker will use his speech to warn prime minister David Cameron that waiting till 2017 to hold the referendum on EU membership risks turning it into a confidence vote in the government.

He wants the referendum brought forward to 2016.

Walker will tell the audience that:

“By 2017 this government will have implemented spending cuts that, while necessary, will not be popular. The third year of an election cycle is a difficult time for any administration. There is a real possibility that a 2017 referendum would be a short-term judgment on the government: a chance to whack the political elite.”

Next up, just after 10am is a debate on Britain’s EU membership between former Labour business secretary Lord Mandelson and former chancellor Lord Lawson, who last week announced he will lead a Conservative party campaign to leave the EU.

Also making an appearance, is chief executive of Lloyds Banking Group, Antonio Horta-Osorio, just a day after chancellor George Osborne announced the sale of the taxpayers’ remaining stake in the bailed out bank. The bank boss is talking on a panel under the banner “The future of banking: How to win back trust in a changing world.”

Alongside its trailing of Walker’s EU referendum thoughts, the IoD is also using its convention to adds its thoughts to the never-ending UK productivity puzzle debate.

Policymakers are looking at the puzzle all wrong, according to the business group’s new report, Balancing UK Productivity and Agility. It wants more focus on “agility” to ensure “new ideas and technologies spread throughout the economy as quickly as possible”.

It warns factors that have driven productivity gains in the past, such as large firms realising economies of scale and developing deep specialisations in certain areas, are no longer relevant for the UK and “it would be foolish to try to recreate them”.

IoD chief economist James Sproule explains:

“In pursuing the nirvana of steadily-rising productivity, one has to bear in mind how our economy is changing, how people choose to work, and what future economic success will look like.

We need to ask if too close a focus on productivity numbers without considering wider factors could pose a long-term risk to the economy and prosperity.”

His report echoes scepticism over how much can be gleaned from current productivity data and what many economists see as a narrow focus on mere output per hour measures.

Updated

Back in the UK, house prices dipped by 0.9% last month, according to mortgage lender Halifax.

But that’s little relief to those hoping to get a house (or buy a bigger one. Prices are up around 8.9% year-on-year. On a quarter-on-quarter basis, they’ve been gaining since the start of 2013.

Jonathan Portes

Interesting…. Jonathan Portes, one of the UK’s better known economists, has left his post as director of the National Institute of Economic and Social Research thinktank.

There doesn’t appear to be an official announcement, but NIESR has updated its website to show that Dame Frances Cairncross is now ‘interim director’.

Portes (who’s staying at NIESR as a research fellow until April) is known for using his statistical nous to fact-checking erroneous claims in the papers, especially over the impact of fiscal policy on poorer households.

But he also raised hackles among right wingers for his comments on austerity; they claimed loudly that Portes (once PM Gordon Brown’s chief economist) was too partisan for an independent thinktank:

Those spats culminated in an epic row with historian Niall Ferguson over an article in the Financial Times, which spawned an 16-page adjudication – and no clear winner (although the FT cleared itself of any failings, of course)

Updated

A general view of Wolfsburg, home to German carmaker Volkswagen.

A general view of Wolfsburg, home to German carmaker Volkswagen. Photograph: Carsten Koall/Getty Images

Over in Wolfsburg, thousands of Volkswagen employees are meeting at company HQ to hear from their new CEO.

Matthias Müller will brief staff on the ongoing emissions scandal, as Volkswagen strives to find a solution after selling millions of vehicles containing ‘defeat devices’ to fool emissions tests.

Müller was appointed as CEO less than two weeks ago, after Martin Winterkorn stepped down following the revelations that VW engines contained illicit software to hide how much noxious gases they produced.

It emerged last night that the probe into the VW scandal centres on two top engineers. Ulrich Hackenberg, Audi’s chief engineer, and Wolfgang Hatz, developer of Porsche’s Formula One and Le Mans racing engines, were among the engineers suspended last week, according to the WSJ.

European stock markets are being dragged down by the news that German factory orders slid in August.

The main indices are all in the red in early trading, with Germany’s DAX shedding almost 0.5%.

European stock markets, October 06 2015

Investors may also be anxious about the eurozone, after Brussels warned Spain last night that i’s 2016 budget isn’t good enough, and needs more spending cuts.

Conner Campbell of SpreadEx explains:

A huge miss in German factory orders (complete with a downward revision for last month’s figure) seems to have taken the edge off of the Eurozone, following a Eurogroup meeting yesterday that hinted at more trouble for the currency union going forwards.

European Commissioner Pierre Moscovici warned that Spain will miss its headline targets in 2015 and 2016, providing yet another bearish note from the country that already includes a 21 month low manufacturing figure, a 9 month low services PMI, a separatist victory in Catalonia AND an impending general election in September.

German economy minister: Global demand is ‘less reliable’

Here’s Associated Press’s early take on the decline in German factory orders:

German factory orders dropped for the second consecutive month in August, led by a drop in demand from countries outside the eurozone and lower demand at home.

The Economy Ministry said Tuesday that orders were down 1.8% in seasonally adjusted terms compared with the previous month. That followed a 2.2% drop in July.

Orders from other countries in the euro area were up 2.5%, following a smaller gain in July. However, demand from inside Germany was off 2.6% percent and orders from outside the eurozone dropped 3.7%.

The Economy Ministry noted that demand from countries beyond the euro area appears to be “less reliable at present.”

Germany has Europe’s biggest economy and is one of the world’s biggest exporters.

Updated

This chart confirms that German industrial orders have tailed off in the last couple of months, after a decent start to the year.

German industrial orders

German industrial orders Photograph: Destatis

The red line shows the total (or Insgesamt), while the blue line shows domestic orders (Inland) and the yellow line shows overseas orders (Ausland).

German factories suffer sliding orders

German factory orders fell unexpectedly in August, fuelling fears that Europe’s largest economy is being hit by slowing global growth.

Industrial orders slid by 1.8%, according to the economy ministry, dashing expectations of a 0.5% rise.

The decline was mainly due to falling demand from outside the eurozone, according to the ministry (which also attribute some of the decline to holidays). Orders from non-euro countries slid by 3.7%, while domestic orders shrank by 2.6%.

This is before the Volkswagen emissions scandal struck, hurting confidence in German industry.

July’s industrial orders has been revised down too, from -1.4% to -2.2%; again, driven by a decline in overseas demand.

It’s a worrying sign, suggesting ripples from the emerging market slowdown are now lapping against the eurozone.

Updated

The Agenda: Stimulus hopes keep markets buoyant

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

There’s a relaxed mood in the markets this morning, as investors become increasingly convinced that central banks won’t be able to tighten monetary policy anytime soon.

European stock markets are expected to inch higher after the Dow Jones industrial average jumped by 304 points overnight.

Last Friday’s disappointing US jobs report has probably helped to kick the first American interest rate rise into 2016.

Jasper Lawler of CMC Markets explains:

The weaker than expected US jobs report significantly reduces the chance of a rate hike this year from the Federal Reserve.

Europe and China could also be on the verge of adding stimulus with deflation and low growth possibly enough motivation for the respective central banks to intervene before the end of 2015.

Over in Japan, the Nikkei has closed 1% higher, as traders in Tokyo anticipate more stimulus from their own central bank.

Also coming up….

The bosses of Britain’s top companies will be gathering at the Institute of Director’s annual bash in London. They’ll be discussing Europe and the refugee crisis (among other topics).

Six former City brokers are going on trial over allegation that they rigged the benchmark Libor interest rate.

And in the City, we’ll be looking at results from budget airline easyJet and pastry purveyor Greggs…..

Updated

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Powered by Guardian.co.ukThis article titled “Growth fears as UK and eurozone service sectors slow – live updates” was written by Graeme Wearden (until 2pm BST) and Nick Fletcher (now), for theguardian.com on Monday 5th October 2015 14.21 UTC

Meanwhile here’s the arrivals at the Eurogroup meeting to discuss the latest Greek bailout programme:

And here’s an extract from the roundtable discussion:

Dennis de Jong, managing director at broker UFX.com said:

With inconclusive economic data in recent weeks, the Fed is now split on the timing of an interest rate rise. That situation is unlikely to change in response to today’s non-manufacturing figures, which aren’t strong enough to sway Janet Yellen and Co towards a clear decision.

A decline on last month puts a dampener on what is actually quite a robust set of numbers. It’s not all doom and gloom, however, as Yellen’s reluctance to act may be seen as a positive move elsewhere.

Wall Street, which has been quiet as it awaits consistency among the financial uncertainty, may now be prompted into increased activity before the end of 2016.

Confirmation that the US services sector saw slowing growth in September comes from the Institute for Supply Management.

The ISM services index fell to 56.9 from 59 in August, and lower than analysts’ expectations of a reading of 57.5p. Both new orders and business activity slowed.

But the employment component showed an increase:

Updated

And shortly we will get the ISM indices…

US service sector growth slows

America’s service sector is growing by less than expected, according to the first of two rival surveys.

Markit’s final purchasing managers index for the sector came in at 55.1 for September, down from an early reading of 55.6, which was also what analysts had been expecting for the final figure. That compares to 56.1 in August.

Markit service sector PMI
Market service sector PMI Photograph: Markit/Markit

Markit’s final composite reading is 55 compared to 55.7 in August. Chris Williamson, Chief Economist at Markit said:

The US economic growth slowed in the third quarter according the PMI surveys, down to around 2.2%. But this largely represents a payback after growth rebounded in the second quarter, suggesting that the economy is settling down to a moderate rate of growth in line with its long term average.

Hiring also remains relatively robust, albeit down from earlier in the year, again suggesting that the economy has shifted down a gear but remains in good health.

“At the moment it remains unclear as to whether growth will weaken further as wemove into the fourth quarter. However, with inflationary pressures waning, policymakers may have some breathing space to gauge the extent of any slowdown. Lower fuel costs helped push average prices charged for goods and services dropping at steepest rate for nearly five years.

Markit composite index
Markit composite index Photograph: Markit/Markit

Updated

Wall Street opens higher

In tandem with other global markets, Wall Street is moving ahead strongly.

The Dow Jones Industrial Average is up 164 points or 12%, while the S&P 500 has opened 0.5% higher.

Markets are being driven by hopes that central banks will not pull the plug on financial support in the immediate future. Friday’s poor US jobs numbers have convinced investors that the prospect of a Federal Reserve rate rise this year is looking less and less likely.

Another factor supporting the market is a rising oil price, which is boosting energy shares. Brent crude is up 2% after reports that Russia wants to meet other producers to discuss the market, where oversupply and falling demand have sent oil prices sharply lower. That could, believe some, presage production cuts. Meanwhile Friday also saw a fall in the number of rigs drilling for oil in the US.

China can manage its economic slowdown but needs to communicate policy more effectively, says the International Monetary Fund.

Ahead of its annual meeting the IMF said China’s exchange rate was in line with medium term fundamentals after the recent devaluations, Reuters reports.

Global corporations are avoiding tax to the tune of up to $240bn a year, according to a new report from the OECD, which has also announced reform measures to tackle the problem. Simon Bowers reports:

An unprecedented international collaboration on tax reform, led by the G20 nations and targeting many of the world’s largest global corporations, will wipe out much of the tax avoidance industry, it was claimed today.

The two-year reform programme, under the auspices of the OECD, was prompted by a spate of revelations in recent years about the tax affairs of multinationals including Starbucks, Google and Amazon.

Alongside the final batch of reforms, published today, the OECD released what it called “extremely conservative” estimates suggesting large global businesses were shifting profits and eroding the tax receipts of economies around the world at a cost of $100bn (£65bn) to $240bn a year — equivalent to between 4% and 10% of global corporation tax revenues.

In the face of increasingly aggressive tax avoidance, countries have been forced to rely more heavily on taxing income less able to be shifted abroad — such as workers’ pay and VAT.

“[The reforms will help] move away from an era when tax planning had become part of core business models,” said Pascal Saint-Amans, who has led the two-year OECD reform programme, backed by 60 countries representing more than 90% of the world’s economy. “Value creation [should be] the core business of industry. Tax planning should just be some supportive, marginal activity… The tax world will not be the same.”

Read more here:

Lunchtime summary: Growth fears after weak services data

A quick recap:

Britain’s recovery slowed last month, according to the latest survey of its dominant service sector.

Companies reported that activity grew at the slowest pace in two and a half years. Economists blame fears over China’s economy, and predict that GDP could grow by just 0.4% in the last three month of this year.

Expansion across the eurozone also eased back in September, data firm Markit reports. Firms in Germany, Spain and Ireland all said growth was slower, although France’s bucked the trend.

European stock markets are up. Shares are being driven by hopes that central banks will continue to stimulate the global economy, and resist early interest rate rises.

The FTSE 100 is now at its highest point of the day, up 132 points at 6262. The French CAC has soared by over 3%.

Two dozen Pacific-Rim countries are celebrating the creation of a major new trade partnership.

Workers have stormed the boardroom of Air France today, as the airline announced plans to cut 2,900 jobs. Two senior executives were forced to flee with ripped shirts.

TOPSHOTS Director of Air France in Orly Pierre Plissonnier, nearly shirtless, tries to cross a fence, helped by security and police officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Air France director Pierre Plissonnier, nearly shirtless, tries to cross a fence after several hundred of employees invaded the firm’s offices today. Photograph: Kenzo Tribouillard/AFP/Getty Images

The Greek government is preparing its new budget. Alexis Tsipras’s government must explain how it will implement tough tax rises and spending cuts demanded by lenders.

Finance minister Euclid Tsakalotos is meeting fellow eurozone finance ministers in Brussels today. They’ll discuss the various prior actions Greece must deliver to receive its next aid tranche, and to open talks on debt relief.

And in the UK, chancellor George Osborne has confirmed that he’s selling off shares in Lloyds Banking Group to the public at a chunky discount.

Updated

European commissioner Pierre Moscovici tweets from Brussels:

The Trans-Pacific Partnership deal is “a huge strategic and political win for US President Barack Obama and Japan’s Shinzo Abe,” says the FT’s Shawn Donnan.

He writes:

It represents the economic backbone of the Obama administration’s strategic “pivot” to Asia and a response to the rise of the US’s chief rival, China, and its growing regional and global influence.

It is also a key component of the “third arrow” of economic reforms that Mr Abe has been pursuing in Japan since taking office in 2012.

Here’s the FT’s take (£): Negotiators strike Pacific trade deal

Historic TPP trade deal agreed

Over in Atlanta, a dozen Pacific Rim nations have reached the most sweeping trade liberalization pact in a generation.

After late hitches over drugs monopolies, and New Zealand’s dairy market, the Trans-Pacific Partnership (TPP) has been hammered out. It is meant to lower trader barriers in the region, and set common standards in around 40% of the world economy.

My colleague Martin Farrer explains:

The TPP aims to lower trade tariffs between the signatory nations and bring in wide-ranging new regulations for investment, agriculture, intellectual property, labour and the environment. This in turn could mean cheaper food, medicine and everyday household goods for millions of people. It will also help the 12 countries to counter China’s rising economic influence in the region.

More here:

Updated

The Brussels press pack are assembling for today’s meeting of finance ministers, where Greece’s new bailout package will be discussed.

But it’s not as exciting as the eurogroup meetings we enjoyed (or was it endured?) this summer, so there’s more space outside:

Updated

Greeks brace for austerity budget

Prime Minister of Greece Alexis Tsipras in parliament last night.
Prime Minister of Greece Alexis Tsipras in parliament last night. Photograph: George Panagakis/Pacific Pres/BI/.

The Greek parliament is back in full force today with prime minister Alexis Tsipras outlining his newly elected government’s policy programme as the draft 2015 budget is also submitted.

Our correspondent Helena Smith reports from Athens

After a week of diplomacy abroad, the Greek prime minister must now face the music of applying what will be the most onerous financial rescue programme to date. It will not be easy.

From months of often fraught negotiations just getting to the point of reaching agreement over the bailout deal, the debate has shifted from the abstract to the real with Greeks now being bombarded with news of what the latest accord will entail. The draft budget is expected to outline an array of hard hitting levies, including the much-hated property tax known as Enfia, as well as pension cuts and structural reforms – the price of being bailed out for a third time to the tune of €86bn.

The measures will throw the debt-stricken economy into recession with the budget forecasting a return to growth in 2017 (for many a conservative estimate).

The Greek finance minister, Euclid Tsakalotos, who is on his way to Luxembourg, will outline the savings and government priorities when he meets euro area counterparts attending tonight’s Euro Group.

One insider tells us:

“He will present the prior actions lenders are demanding at the meeting,”

“These are the first package of measures we have agreed to apply [in exchange] for loans.”

The measures, which are expected to include deep cuts to monthly pensions over €1,000, have to be implemented in the coming weeks – before more than 60 others are enforced in November for international creditors to begin a review of the Greek economy.

All of which is going to require nifty explanation when Tsipras (whose radical left Syriza party was first catapulted into office vowing to “cancel” such measures) takes to the podium to present the policies of his second term in office at 7:30pm this evening.

Unions and leftists are already girding for battle. “We are organising the response of popular workers to the new wave of attack,” the communist Pame announced this morning, calling on Greeks to participate in a mass rally on October 22 and a strike on November 12.

Updated

Air France-KLM has criticised those responsible for today’s violence, and insisted that most staff were protesting peacefully before a group burst into its boardroom.

A spokesman said:

“This violence was carried out by particularly violent, isolated individuals, whereas the protest by striking personnel was taking place calmly up until then.”

Air France assistant director long-haul flight, Pierre Plissonnier, left, is protected by security guards as he flees the Air France headquarters at Roissy Airport, north of Paris, France, after scuffles with union activists. Monday, Oct. 5, 2015. Union activists protesting proposed layoffs at Air France stormed the headquarters during a meeting about the job cuts, zeroing in on two managers who had their shirts torn from their bodies, scaled a fence and fled under police protection. (AP Photo/Jacques Brinon)
Air France assistant director long-haul flight, Pierre Plissonnier, left, is protected by security guards as he flees the Air France headquarters. Photograph: Jacques Brinon/AP

Associated Press has more details on the Air France protests this morning:

Union activists protesting proposed layoffs at Air France stormed the headquarters during a meeting, zeroing in on two managers who had their shirts torn from their bodies, scaled a fence and fled under police protection.

An Associated Press photographer saw about a hundred activists rush the building. The managers who fled included the head of human resources.

Alexandre de Juniac, the CEO of Air France-KLM, announced Friday the company would have to cut jobs after failing to reach an agreement with pilots. French media reported a proposal to slash 2,900 jobs.

De Juniac said the company was being squeezed by low-cost airlines in Europe and Gulf carriers for long-haul flights. Monday’s meeting was intended to detail the cuts, which he told Europe 1 radio would be “significant.”

Employees of Air France shout slogans inside the company headquarters in Roissy-en-France, on October 5, 2015, interrupting the launch of the plan at a central committee meeting.
Employees of Air France shout slogans inside the company headquarters in Roissy-en-France, on October 5, 2015, interrupting the launch of the plan at a central committee meeting. Photograph: Kenzo Tribouillard/AFP/Getty Images

Fortunately, Xavier Broseta and Pierre Plissonnier did manage to escape the demonstrators, sans chemises.

Air France director of Human Ressources, Xavier Broseta, right, and Air France assistant director long-haul flight, Pierre Plissonnier, center, are protected by a police officer as they flee Air France headquarters at Roissy Airport, north of Paris, after scuffles with union activist, Monday, Oct. 5, 2015. Union activists protesting proposed layoffs at Air France stormed the headquarters during a meeting about the job cuts, zeroing in on two managers who had their shirts torn from their bodies, scaled a fence and fled under police protection. (AP Photo/Jacques Brinon)

Air France execs lose their shirts as workers storm HQ

Over in Paris, two Air France executives appear to have had their shirts ripped from their backs after the airline announced plans to cut up to 2,900 jobs.

According to local media reports, several hundred workers stormed the airline’s headquarters this morning, after it announced the cutbacks.

Photos from the scene show Pierre Plissonnier, Air France’s assistant director for long-haul flights, leaving the scene in a disheveled state.

Director of Air France in Orly Pierre Plissonnier, nearly shirtless, runs away from the demonstrators, helped by security officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Pierre Plissonnier, the director of Air France in Orly, running away from the demonstrators, helped by security officers, after several hundred of employees invaded the offices of Air France. Photograph: Kenzo Tribouillard/AFP/Getty Images
Director of Air France in Orly Pierre Plissonnier, nearly shirtless, walks away from the crowd, helped by security and police officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Plissonnier walking away from the crowd. Photograph: Kenzo Tribouillard/AFP/Getty Images

Human resources boss Xavier Broseta is pictured trying to climb a fence to flee.

Xavier Broseta, Executive Vice President for Human Resources and Labour Relations at Air France, is evacuated by security after employees interrupted a meeting at the Air France headquarters building in Roissy<br />A shirtless Xavier Broseta (C), Executive Vice President for Human Resources and Labour Relations at Air France, is evacuated by security after employees interrupted a meeting with representatives staff at the Air France headquarters building at the Charles de Gaulle International Airport in Roissy, near Paris, France, October 5, 2015.” width=”1000″ height=”662″ class=”gu-image” /><br />
<figcaption> <span class=Xavier Broseta, Executive Vice President for Human Resources and Labour Relations at Air France, is evacuated by security. Photograph: Jacky Naegelen/Reuters
Human Resources Assistant Manager of Air France Xavier Broseta, shirtless, tries to cross a fence, helped by security and police officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Broseta then tried to cross a fence, helped by security and police officers. Photograph: Kenzo Tribouillard/AFP/Getty Images

It’s not clear exactly what happened. But the AFP newswire reports that CEO Frederic Gagey “made a hasty exit, according to two members of the committee”, after workers broke into the meeting.

Unions have also called a strike to protest at the job cuts, which were announced after pilots turned down a proposal to work 100 more hours per year for the same salary.

It could see 300 pilots, 700 air hostesses and stewards, and 1,900 ground staff laid off by 2017.

Le Figaro reports that Air France is planning to file a complaint of “aggravated violence”. More here.

Updated

European stock markets aren’t panicking at today’s service sector slowdown.

Instead, they continue to rally –– catching up with Wall Street’s late jump on Friday night.

France’s CAC index is the best performer, following the news that its services firms actually caught up (a little) with the rest of the eurozone last month.
But other markets are also gaining ground, with the FTSE 100 jumping over around 2%, despite warnings that the economy may be slowing down.

European stock markets, 11am October 05 2015
European stock markets, 11am today. Photograph: Thomson Reuters

So what’s going on?

Well, investors do seem confident that the US Federal Reserve won’t raise rates this month, and probably not before 2016.

That’s bullish for shares, and also weakens the US dollar — which has a positive effect on commodity prices and oil. And that’s why mining shares are up today, while Royal Dutch Shell has gained 4%.

Jasper Lawler of CMC says:

UK and European markets were higher across the board on Monday, playing catch-up from the biggest turnaround on the Dow Jones Industrial Average in four years on Friday.

The French CAC was higher by over 2.5% supported by positive French service sector data. Missed expectations for Germany’s service sector took the edge off gains on the DAX, which was still higher by over 1.5%.

A new survey of Britain’s top finance chiefs confirms that the UK economy may be weakening.

Our Katie Allen reports this morning:

China’s downturn, the prospect of rising interest rates and uncertainty about the global economic outlook have knocked confidence among bosses of the UK’s biggest companies, according to a survey.

Chief financial officers (CFOs) polled by the consultancy Deloitte reported a sharp rise in uncertainty facing their businesses and have scaled back their expectations for investment and hiring over the coming year.

Almost three-quarters of the 122 CFOs, or 73%, said the level of financial and economic uncertainty was either above normal, high or very high. That was up from 55% in the second quarter of this year and is the highest proportion for more than two years.

More here:

Deloitte survey of CFOs
Uncertainty is rising…. Photograph: Deloitte/Guardian

Economist Howard Archer, of IHS Global Insight, fears UK economic growth could stumble in the last quarter of 2015:

UK "recovery at risk" from Chinese chill

The slowdown across Britain’s service sector is putting the recovery at risk, says David Noble CEO at the Chartered Institute of Procurement & Supply.

He blames the knock-on effect of China, which sparked global market panic in August after Beijing devalued the yuan.

Noble says:

The further softening of growth in the services sector must now be causing some concern for the sustainability of the recent recovery in the UK economy….

It appears that when China sneezes, the world catches a cold as some companies cited the region as a cause for worldwide concern.

Some instant reaction to the slowdown in Britain’s services sector:

UK service sector growth hits 2.5 year low

Britain’s service sector suffered a sharp slowdown last month, new data shows, raising fears that the economy may be faltering.

Data firm Markit reports that activity across the sector grew at its slowest rate since April 2013 in September. Its service PMI fell to 53.3, from August’s 55.6 (where 50=stagnation).

Firms reported that new business slowed, with some clients unwilling to place new contracts in the current “global economic uncertainty”.

More encouragingly, firms did keep hiring staff, but business investment is also under pressure.

And with Germany, Ireland and Spain’s service sectors also slowing (see last post), signs are building that the European economy may be faltering.

UK service PMI, September 2015
The blue line = today’s PMI survey Photograph: Markit

Markit’s Chris Williamson fears that “the economy sank further into a soft patch at the end of the third quarter”, and is only growing at 0.3% per quarter.

Services makes up around three-quarter of the UK economy, so any slowdown has serious consequences.

Williamson says:

“Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular.

There are also signs that consumers have become more cautious and are pulling back on their leisure spending, such as on restaurants and hotels.”

Updated

Eurozone service slows, putting more pressure on ECB

Growth across Europe’s private sector is slowing, according to the latest healthcheck of the region’s service sector.

Markit’s Eurozone PMI, which measures activity at thousands of companies, dipped to a four-month low of 53.6 in September, down from 54.3 in August. That shows the sector kept growing, but at a slower rate.

Growth in the service sector hit a seven-month low, with the Services PMI dropping to 53.7 from 54.0.

Growth in Spain hit its lowest level since January, although France – usually a laggard in these surveys – clawed back some ground:

Here’s the detail:

Eurozone PMIs, September 2015
Eurozone PMIs, September 2015 Photograph: Markit

Chris Williamson, chief economist at Markit, reckons that the slowdown could raise the chances of fresh stimulus measures from the European Central Bank:

“The final PMI reading came in slightly below the earlier flash estimate but still leaves a signal of the eurozone economy having expanded 0.4% in the third quarter.

“However, the failure of the economy to pick up speed over the summer will be a disappointment to the ECB, especially with job creation sliding to an eight-month low.

“The weakening of the pace of expansion in September raises the risk of growth fading further in the fourth quarter, which would in turn boost the likelihood of the ECB opening the QE taps further.

Mining stocks are packing the top of the FTSE 100 leaderboard:

Top risers on the FTSE 100
Top risers on the FTSE 100 this morning. Photograph: Thomson Reuters

That shows optimism that central banks will do more to stimulate the global economy, now that the US labor market appears to be weakening.

Tony Cross of Trustnet Direct explains:

Consensus is building that the Federal Reserve won’t now be in a position to hike interest rates before the end of the year. This gives emerging markets a little more breathing room and it’s the mining stocks that are forging their way to the top of the table.

Updated

European markets jump on stimulus hopes

Shares are rallying across Europe this morning, fuelled by hopes that central banks keep topping up the punchbowl for longer.

France’s CAC index is the biggest riser, up nearly 2%, and Germany’s DAX gaining 1.3%.

The FTSE 100 is close behind, up almost 100 points, as traders shake off their disappointment over Saturday night’s rugby.

European stock markets, October 05 2015

Investors have had a weekend to ponder Friday’s disappointing US jobs report, and concluded that a weak labor market means the Federal Reserve will resist raising interest rates in 2015.

And that’s encouraging them back into the market.

Kim Young-jun, a stock analyst at SK Securities in Seoul, explains (via Reuters)

“Risk aversion weakened today as the weak U.S. employment data supported expectations that the Fed would put off the timing of rate hikes.”

Glencore’s shares have rallied by 8% in early trading in London, fuelled by that takeover talk and speculation that it could sell its agricultural business.

They’re up 7.8p at 108.6p, having briefly jumped 20% to 114.45p. That’s quite a recovery, given they slumped to 66p last week.

However, it’s a weaker rally than in Asia, though, where they spiked 70% at one stage today.

Glencore has just issued a statement to the City, saying it is:

…the Board confirms that it is not aware of any reasons for these price and volume movements or of any information which must be announced to avoid a false market in the Company’s securities or of any inside information that needs to be disclosed…

That could dampen some of the chatter that a big deal is close…..

Updated

Treasury to sell £2bn Lloyds stake to public

Lloyds Bank shares to go on sale to the British public<br />epa04963989 (FILE) A file photograph showing a sign outside a Lloyds bank branch in London, Britain, 23 October 2014. According to news reports, on 05 October 2015 the British Chancellor of the Exchquer, Geroge Osbourne, has announce that 2 billion GBP or 2.7 billion euro worth of Lloyds Bank shares to go on sale to the British public. EPA/WILL OLIVER” width=”1000″ height=”631″ class=”gu-image” /> </figure>
<p><strong>Seven long years after bailing out Lloyds Banking Group, the UK government is finally selling some of its remaining stake to the public.</strong></p>
<p><a href=The Treasury has announced plans to sell £2bn of Lloyds shares in a retail offering. Anyone taking part will get a 5% discount, plus a bonus shares for every 10 they hold for at least a year.

The value of the bonus share incentive will be capped at £200 per investor. People applying for investments of less than £1,000 will be prioritised.

The move brings a bit of Thatcherite glamour (?!) to the Conservative Party conference, where delegates fondly remember the “Tell Sid” privatisation fetish drive of the 1980s.

But as the Economist’s Stan Pignal points out, discounted share sales benefit some rather more than others….

Updated

Reports that Glencore is in talks to sell its entire agriculture business are helping to drive its shares higher.

That would provide fresh resources to tackle its $30bn debt mountain, and to handle a further drop in commodity prices.

Glencore shares surge on sale talk

Something is going on at Glencore, the troubled commodity trading and mining company.

Shares in Glencore leapt by over 70% in Hong Kong overnight, and are currently up over 30%.

This comes after the Daily Telegraph reported that Ivan Glencore is prepared to listen to takeover offers for the company he has created, following the recent slump in its value.

Their commodity editor Andrew Critchlow wrote:

Glencore would listen to offers for a takeover of the entire company but its management does not believe there are any buyers willing to pay a fair value for the business in the current market.

That report appears to have sparked a wave of buying into Glencore, whose shares have lost around three-quarters of their value in the last year.

Glencore itself, though, says it’s “unaware” of the reason behind the surge, according to Bloomberg’s Jonathan Ferro.

American Apparel files for bankrupcy

Big news breaking in the retail sector — American Apparel, supplier of ethical clothing and god-awful adverts, has filed for bankruptcy protection.

The move follows a steady slide in sales, and ever-more disturbing antics by ex-chairman Dov Charney, who was forced out a year ago.

The Agenda: US jobs report lingers

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

A new week begins with investors digesting still last Friday’s disappointing US jobs data.

September’s Non-Farm Payroll was a bit of a shocker, with just 142,000 new jobs created, and wages unchanged month-on-month. That suggests America’s economy is being hit by the slowdown in emerging markets such as China, raising fears that a new downturn is looming.

And that has actually pushed shares higher in Asia this morning on speculation that monetary policy is going to stay loose for even longer.

Japan’s Nikkei gained 1.6%, while the Indian market is up around 1.5%:

We’ll get a fresh insight into the health of the global economy today, when new surveys of the world service sector are released.

Those Purchasing Managers Surveys will show if growth speeded up or slowed down; we get the eurozone report at 9am BST and the UK at 9.30am BST.

And over in Greece, Alexis Tsipras’s new government will be presenting its new budget, ahead of a vote on Wednesday.

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

Updated

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Finance institute forecasts net capital outflow from emerging markets for first time since 1988 leaving states vulnerable to capital drought. The IIF’s analysts say the current reversal is the latest wave of a homegrown downturn…

Powered by Guardian.co.ukThis article titled “Global investors brace for China crash, says IIF” was written by Heather Stewart, for theguardian.com on Thursday 1st October 2015 18.34 UTC

Global investors will suck capital out of emerging economies this year for the first time since 1988, as they brace themselves for a Chinese crash, according to the Institute of International Finance.

Capital flooded into promising emerging economies in the years that followed the global financial crisis of 2008-09, as investors bet that rapid expansion in countries such as Turkey and Brazil could help to offset stodgy growth in the debt-burdened US, Europe and Japan.

But with domestic investors in these and other emerging markets squirrelling their money overseas, at the same time as international investors calculate the costs of a sharp downturn in Chinese growth, the IIF, which represents the world’s financial industry, said: “We now expect that net capital flows to emerging markets in 2015 will be negative for the first time since 1988.”

capital flows to emerging markets set to turn negative

Capital flows to emerging markets look set to turn negative. Photograph: IIF

Unlike in 2008-09, when capital flows to emerging markets plunged abruptly as a result of the US sub-prime mortgage crisis, the IIF’s analysts say the current reversal is the latest wave of a homegrown downturn.

“This year’s slowdown represents a marked intensification of trends that have been underway since 2012, making the current episode feel more like a lengthening drought rather than a crisis event,” it says, in its latest monthly report on capital flows.

The IIF expects “only a moderate rebound” in 2016, as expectations for growth in emerging economies remain weak.

Mohamed El-Erian, economic advisor to Allianz, responding to the data, described emerging markets as “completely unhinged”, and warned that US growth may not be enough to rescue the global economy. “It’s not that powerful to pull everybody out,” he told CNBC.

Capital flight from China, where the prospects for growth have deteriorated sharply in recent months, and the authorities’ botched handling of the stock market crash in August undermined confidence in economic management, has been the main driver of the turnaround.

“The slump in private capital inflows is most dramatic for China,” the institute says. “Slowing growth due to excess industrial capacity, correction in the property sector and export weakness, together with monetary easing and the stock market bust have discouraged inflows.”

At the same time, domestic Chinese firms have been cutting back on their borrowing overseas, fearing that they may find themselves exposed if the yuan continues to depreciate, making it harder to repay foreign currency loans.

The IIF’s analysis shows that portfolio flows – sales of emerging market stocks and bonds – have been more important than the reversal of foreign direct investment (for example, multinationals closing down plants or business projects) in the recent shift.

It warns that several countries are likely to find their economies particularly vulnerable to this capital drought.

“Countries most in jeopardy from emerging-market turbulence include those with large current account deficits, questionable macro-policy frameworks, large corporate foreign exchange liabilities, and acute political uncertainties. Brazil and Turkey combine these features.

This warning echoed a one from the International Monetary Fund last week, that rising US interest rates could unleash a new financial crisis, as firms in emerging economies find themselves unable to service their debts.

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