Eurozone crisis

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

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

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

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

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

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

Brian Davidson says:

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

Updated

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

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

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

More here:

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

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

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

The pound is tumbling on the FX markets today.

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

Sterling is being hit by two events

Back to the eurozone.

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

ECB policy options

Updated

US private sector job creation hits five-month high

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

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

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

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

US ADP Payroll

US ADP Payroll Photograph: ADP / fastFT

As fastFT puts it:

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

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

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

Euro vs US dollar today

Euro vs US dollar today Photograph: Thomson Reuters

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

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

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

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

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

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

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

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

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

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

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

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

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

I’ve taken the quotes off Reuters:

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

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

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

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

European stock markts

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

Updated

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

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

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

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

Citi predicts lots more QE.

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

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

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

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

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

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

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

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

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

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

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

Updated

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

Eurozone inflation: the detail

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

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

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

Eurozone inflation, November 2015 Photograph: Eurostat

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

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

Eurozone inflation stuck at 0.1%

Here comes the eagerly-awaited eurozone inflation data!

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

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

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

More to follow….

Updated

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

Pound vs dollar today

Pound vs dollar today Photograph: Thomson Reuters

Updated

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

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

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

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

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

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

Construction recovery is ‘down but not out’

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

Construction PMI by sector

Tim Moore, senior economist at Markit, explains:

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

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

UK construction growth hits seven-month low

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

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

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

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

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

Markit says:

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

UK construction PMI

More to follow…

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

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

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

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

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

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

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

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

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

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

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

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

European stock markets

European stock markets in early trading Photograph: Thomson Reuters

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

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

Ramin Nakisa of UBS

Ramin Nakisa of UBS Photograph: Bloomberg TV

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

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

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

Nakisa tells Bloomberg TV:

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

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

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

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

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

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

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

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

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

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

Updated

VW shareholders to face workers

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

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

Bloomberg has a good take:

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

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

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

Updated

The Agenda: Eurozone inflation could seal stimulus move

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

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

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

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

Or both.

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

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

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

Also coming up today….

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

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

Updated

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Eurozone ministers are expected to refuse to hand over €2bn in new loans to Greece today, as a row over bad loans deepens. Officials: Eurogroup won’t release €2bn to Greece. France: We want a deal with Greece. OECD warns on global trade slowdown…

Powered by Guardian.co.ukThis article titled “Greece battles with creditors over new bailout payment – business live” was written by Graeme Wearden, for theguardian.com on Monday 9th November 2015 13.57 UTC

Wolfgang Schauble also flagged up that Greece has not yet implemented its new privatisation fund.

This was a key part of July’s bailout deal, under which €50bn of Greek assets will be sold off to cover the cost of recapitalising its banking sector.

Wolfgang Schauble

Germany’s Wolfgang Schäuble has arrived at the meeting.

He sounds fairly relaxed as he speaks to reporters.

Schäuble says that Greece has not yet taken all the required steps to qualify for its next aid tranche (according to his knowledge anyway).

Here’s the key quote from Eurogroup chief Dijsselbloem, confirming that Greece won’t get its €2bn today:

“The 2 billion will only be paid out once the institutions give the green light and say that all agreed actions have been carried out and have been implemented. That still has not happened.”

Some reaction to Jeroen Dijsselbloem’s comments as he arrived at the eurogroup meeting:

Dijsselbloem: Greece must complete first milestones very soon

Eurogroup president Jeroen Dijsselbloem
Eurogroup president Jeroen Dijsselbloem Photograph: EbS

An official limo has just deposited Eurogroup president Jeroen Dijsselbloem at today’s meeting.

He gave a brief ‘doorstep’ to reporters — it sounds like he’s not expecting to sign off Greece’s next aid tranche today.

Dijsselbloem says progress has been made in recent weeks regarding Greece’s banks and reform programmes.

But there are still open issues, and a lot more work needs to be done in the next two weeks.

The first set of milestones must be completed soon, he adds (which would pave the way to disbursing that €2bn in new loans).

And Dijsselbloem says he can’t speculate about the political crisis in Portugal where left-wing parties could soon win power.

My understanding is there will be debate today and tomorrow, says Dijsselbloem. There is always a legitimate government in each country, and that’s the government we work with….

Updated

Moscovici: Still a little way to go on Greece

Pierre Moscovici

Ministers are starting to arrive at today’s Eurogroup meeting in Brussels.

Commissioner Pierre Moscovici has told reporters gathered outside that he hopes Greece will receive its €2bn aid tranche this week, if not today.

Moscovici says he had “very positive, very fruitful meetings” in Athens last week with prime minister Alexis Tsipras and finance minister Euclid Tsakalotos.

The moves are positive. Most of the milestones are already adopted or decided. There is still a way to go.

We are not yet completely there, but I am hopeful and confident that with the spirit of compromise, with good co-operation with the authorities we can make it… if not today then in the days to come.

We are not far from that, but obviously there is a little way to go.

Moscovici then vanished inside, where he (or his team) tweeted this optimistic message too:

Shares are falling sharply on the Lisbon stock market, as investors react to the latest political upheaval in Portugal.

The main stock index, the PSI 20, has shed more than 2%, as the country’s socialist parties prepare to oust the centre-right administration sworn in two weeks ago.

Portuguese sovereign bonds are also continuing to fall, showing greater anxiety over the prospect of an anti-austerity government taking over.

The 10-year Portuguese bond is now yielding nearly 2.9%, a jump of 23 basis points. That’s a four-month high.

Over the weekend, four left-wing parties put aside their differences to support a legislative programme. They collectively hold a majority of seats in the parliament, following October’s election.

Analysts at the Royal Bank of Scotland Group have already warned that the Socialist-led program “is clearly less market-friendly than the one of the incumbent government,” Bloomberg flags up.

More here:

Updated

Greece “plans return to capital markets” in 2016

Now here’s a thing. Greece is apparently hoping to return to the financial markets next year.

Government insiders have told the Financial Times that plans are afoot to sell debt in the capital markets in 2016.

Despite the wild drama this year (capital controls, failing to repay the IMF, nearly leaving the eurozone), Athens hopes that investors will put their faith in them.

The FT says:

It won’t be in the first quarter but summer has been talked about,” said a person familiar with the situation.

“It depends on a positive chain reaction of events but discussions have been held.”

Full story: Greece plans a return to capital markets

Experienced City investors may raise their eyebrows….

On the other hand, Greece hasn’t actually defaulted on the three-year debt it issued last summer:

Updated

European Commissioner president Jean-Claude Juncker has just welcomed eurogroup president Jeroen Dijsselbloem to his office, for talks ahead of this afternoon’s meeting of finance chiefs.

Dijsselbloem got the tradition greeting:

Analyst: Greek crisis is repeating

Peter Rosenstreich, head of market strategy at Swissquote Bank, says investors need to pay attention to Greece again:

Rosenstreich is worried that Athens and its eurozone neighbours couldn’t reach agreement on how to handle the repossession of houses from people who are in default on their mortgages.

It suggests the whole third bailout deal, agreed after so much angst in July, may be in early trouble.

Rosenstreich says:

Left-wing Syriza is concerned that the high threshold will expose too many Greece citizens to the loss of their primary properties. In addition, Athens is balking at a 23% take rate on private schools.

This feels like a repeat of 8-months ago. The whole world understood that the third bailout agreement made was unsustainable. It was only a matter of time before it unraveled.

Getting back to Greece…

AFP’s man in Brussels, Danny Kemp, has heard that the outstanding issues between Greece ands its creditors *might* be resolved in a few days.

The OECD has also cut its forecast for global growth this year to 2.9%, down from 3%, due to the sharp slide in trade.

It also predicts growth of 3.3% in 2016, down from 3.6% previously.

The two demonstrators who disrupted David Cameron’s speech have revealed they created a fictitious company to get into the CBI’s flagship event:

Perhaps the CBI should get some advice from the European Central Bank, which upgraded its own security systems after a protester jumped on Mario Draghi’s desk this year…

The OECD’s latest economic outlook is online here.

OECD sounds alarm over global trade

The OECD has just released its latest economic projections.

And the Paris-based thinktank has warned that global growth is threatened by the impact of China’s slowdown on world trade, but raised its forecast for US growth.

It also urged richer countries to step up investment while keeping monetary policy loose, as my colleague Katie Allen explains.

The thinktank’s twice-yearly outlook highlights risks from emerging markets and weak trade.

Presenting the Outlook in Paris, OECD Secretary-General Angel Gurría said:

“The slowdown in global trade and the continuing weakness in investment are deeply concerning. Robust trade and investment and stronger global growth should go hand in hand.”

The thinktank edged up its forecast for economic growth in the group of 34 OECD countries this year to 2.0% from 1.9% in June’s outlook, when it had noted a sharp dip in US growth at the opening of 2015. For 2016, it has cut the forecast for OECD countries’ growth to 2.2% from 2.5%.

The OECD left its forecasts for the UK little changed with growth of 2.4% this year and next, compared with a forecast for 2016 growth of 2.3% made in June. The US economy, the world’s biggest, is now seen growing 2.4% this year and 2.5% in 2016, compared with June’s forecasts of 2.0% and 2.8%.

On the UK, the OECD said economic growth was projected to “continue at a robust pace over the coming two years, driven by domestic demand.”

Updated

Greece’s economy minister, George Stathakis, has suggested that eurozone governments might have to take a ‘political decision’ on whether Greece should get its €2bn aid tranche.

Stathakis told Real FM radio that talks with officials over how to enforce foreclosure laws have run their course:

The thorny issue is the distance that separates us on the issue of protecting primary residences.

“I think the negotiations we conducted with the institutions has closed its cycle .. so it’s a political decision which must be taken.

Updated

WSJ: Eurozone won’t release Greek loan today

Two eurozone officials have told the Wall Street Journal that there’s no chance that Greece will get its €2bn bailout loan at today’s eurogroup meeting.

That won’t please Michel Sapin, given his optimistic comments earlier. But it appears that Greece simply hasn’t done enough to satisfy lenders….

…in particular, over how to treat householders who can’t repay their mortgages. Athens and its creditors are still divided over which householders should be protected from foreclosure.

The WSJ’s Gabriele Steinhauser and Viktoria Dendrinou explains:

Senior officials from the currency union’s finance ministries were updated on Greece’s implementation of around 50 promised overhauls, known as milestones, during a conference call Sunday afternoon. While progress has been made on some issues—including measures to substitute a tax on private education, the governance of the country’s bailed-out banks and the treatment of overdue loans—Athens and its creditors will need more time to sign off on all overhauls, the officials said.

Greece needs the fresh loans to pay salaries and bills and settle domestic arrears. However, the government faces no immediate major payments to its international creditors, reducing the sense of urgency.

There will be “no agreement on [the] €2 billion,” one official said.

Updated

Drama at the CBI conference!

David Cameron’s speech has been briefly disrupted by protesters, chanting that the CBI is the “voice of Brussels”.

They’re clearly unhappy that Britain’s top business group is firmly in favour of EU membership:

Cameron handles it pretty well – suggesting they ask him a question rather than looking foolish.

Updated

Another important meeting is taking place in Brussels today.

UK business secretary Sajid Javid will discuss the crisis in Britain’s steel works with EU economy and industry ministers this afternoon.

Steel unions have urged Javid to demand a clampdown on cheap steel imports from China, which they blame for triggering thousands of job cuts across the UK steel industry:

Cameron at the CBI

David Cameron at the CBI
David Cameron at the CBI Photograph: Sky News

David Cameron is telling the CBI that he’s met business concerns, by cutting red tape and corporate taxes.

On infrastructure, he says the government has made progress – citing the planned HS2 railway – but admits there’s more to do.

We want to the most business friendly, enterprise friendly, government in the world, he adds. But the PM also acknowledges that Britain must do better on exports.

And he’s now outlining a new plan to give everyone guaranteed access to broadband, by 2020.

My colleague Andrew Sparrow is covering all the key points in his politics liveblog:

Heads-up: prime minister David Cameron is addressing the CBI’s annual conference in London. There’s a live feed here.

He’s expected to warn that he could consider campaigning to leave the EU, if his attempts to reform Britain’s relationship with Brussels is met with a ‘deaf ear’.

Updated

The prospect of yet another tussle over Greece’s bailout programme is casting a pall over Europe’s stock markets this morning.

The main indices are mainly in the red, as investors prepare to hear the dreaded phrase ‘eurogroup deadlock’ again.

European stock markets, early trading, November 09 2015
European stock markets this morning Photograph: Thomson Reuters

Conner Campbell of SpreadEx says that Greece’s “sluggish progress” over implementing foreclosure rules is an unwelcome reminder of the eurozone’s lingering issues.

The country’s next €2 billion tranche, which should be signed off at today’s Eurogroup meeting, is currently being withheld by Greece’s creditors, who are dissatisfied with the way the region’s hot potato has (or hasn’t) implemented the required reforms.

It’ Déjà vu all over again, as China’s stock market is pushed up by stimulus hopes, and Greece’s bailout hits a snag.

Open Europe analyst Raoul Ruparel points out that today’s dispute is small potatoes, compared to the big challenge of cutting Greece’s debt pile.

Greece is also clashing with its creditors over plans to hike the tax rate for private education, as the Telegraph’s Mehreen Khan explains:

That’s a slightly unusual issue for a hard-left party to go to the barricades over, when it needs agreement with its lenders to unlock the big prize of debt relief.

Updated

France: We want a Greek deal today

French Finance minister Michel Sapin.
Michel Sapin. Photograph: Lionel Bonaventure/AFP/Getty Images

France is playing its traditional role as Greece’s ally, ahead of today’s meeting of eurozone finance chiefs.

French finance minister Michel Sapin has told reporters in Paris that he hopes an agreement can be reached today over the main outstanding hurdle — how to handle bad loans at Greek banks (as explained earlier).

Sapin offered Athens his support, saying:

Greece is making considerable efforts. They are scrupulously respecting the July agreement.

One thorny issue remains: the seizure of homes for households who can’t pay their debts. I want an agreement to be reached today. France wants an agreement today.

(thanks to Reuters for the quotes)

Updated

Greek journalist Nick Malkoutzis of Kathimerini tweets that the gloss is coming off Alexis Tsipras’s new administration:

Portuguese bond yields jump as leftists prepare for power

The prospect of a new anti-austerity government taking power in Portugal is hitting its government debt this morning.

The yield (or interest rate) on 10-year Portuguese bonds has risen from 2.67% to 2.77%, a ten-week high.

That’s not a major move, but a sign that investors are anxious about events in Lisbon.

Portuguese 10-year bond yields

Updated

This new dispute over Greece’s bailout comes three days before unions hold a general strike that could bring Athens to a standstill.

The main public and private sector unions have both called 24-hour walkouts for Thursday, to protest against the pension cuts and tax rises contained in its third bailout deal.

ADEDY, the civil servants union, accused the government of taking over “the role of redistributing poverty”.

Just six week after winning re-election, Alexis Tsipras is facing quite a wave of discontent….

Dow Jones: Ministers won’t release Greek aid today

The Dow Jones newswire is reporting that eurozone finance ministers definitely won’t agree to release Greece’s next aid tranche at today’s meeting, due to the lack of progress over its bailout measures:

Updated

Updated

Greek officials have already warned that the argument over legislation covering bad loans won’t be resolved easily.

One told Reuters that:

There is a distance with lenders on that [foreclosure] issue, and I don’t think that we will have an agreement soon.

Prime minister Alexis Tsipras discussed the issue with Commission chief Jean-Claude Juncker yesterday.

The official added that those talks were a step towards resolving the issue at “a political level”; Greek-speak for a compromise hammered out between leaders, rather than lowly negotiators.

Updated

Greek debt talks hit by foreclosure row

University students holding flares burn a European flag outside the Greek parliament during a protest in central Athens last Thursday.
University students holding flares burn a European flag outside the Greek parliament during a protest in central Athens last Thursday. Photograph: Petros Giannakouris/AP

After a couple of quiet months, Greece’s debt crisis has loomed back into the spotlight today.

A new dispute between Athens and her creditors is holding up the disbursement of Greece’s next aid tranche, worth €2bn.

Athens spent last weekend in a fevered attempt to persuade its creditors that it has met the terms agreed last summer, to qualify for the much-needed cash.

But it appears that lenders aren’t convinced, meaning that the payment won’t be signed off when eurogroup ministers meet in Brussels at 2pm today for a Eurogroup meeting.

The two sides are still arguing over new laws to repossess houses from people who are deep in arrears on their mortgage payments.

Athens is trying to dilute the terms agreed in July’s bailout deal, but eurozone creditors are sticking to their guns. They insist that Greek residences valued above €120,000 should be covered by the foreclosure laws, down from the current level of €200,000.

The Kathimerini newspaper explains:

The key stumbling block is primary residence foreclosures.

Greece has put forward stricter criteria that protects 60 percent of homeowners, while suggesting that this is then gradually reduced over the next years.

With a deal unlikely today, officials are now racing to get an agreement within 48 hours or so:

Greece told to break bailout deadlock by Wednesday

And Greece certainly needs the money, to settle overdue payments owed to hundreds of government suppliers who have been squeezed badly this year.

Updated

The Agenda: Markets see Fed hike looming

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

Across the globe, investors are finally facing the prospect that the long run of record low interest rates is ending, at least in America.

There’s now a 70% chance that the US Federal Reserve hikes borrowing costs in next month’s meeting, according to this morning’s data.

This follows Friday’s strong US jobs report, which show 271,000 new positions created last month. With earnings rising too, Fed doves will probably be tempted to finally press the rate hike button at December’s meeting.

That is pushing up the dollar this morning, and weakening the euro. That will please the European Central Bank, as it ponders whether to launch its own new stimulus measures.

European stock markets are expected to inch higher at the open:

Also coming up….

  • The OECD will issue new economic forecasts at 10.30am GMT.
  • Britain’s business leaders are gathering in London for the CBI’s latest conference. The event is dominated by the UK’s “Brexit” referendum, and claims that the CBI is too pro-EU.
  • Eurozone finance ministers are holding a eurogroup meeting in Brussels this afternoon.

And there is fresh drama in the eurozone.

In Portugal, three left-wing parties have agreed to work together in a new “anti-austerity government”.

That will bring down minority administration created by Pedro Passos Coelho two weeks ago, after October’s inconclusive election.

And with Greece struggling to implement its own austerity measures, Europe’s problems are pushing up the agenda again.

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

Updated

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Powered by Guardian.co.ukThis article titled “Bank of England governor has ‘no regrets’ over interest rates – business live” was written by Graeme Wearden, for theguardian.com on Thursday 5th November 2015 14.52 UTC

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

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

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

Bank of England

Updated

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

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

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

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

And so it begins…

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

“Super Thursday has quickly turned into Superfluous Thursday.

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

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

Updated

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

BoE forecasts

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

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

Updated

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

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

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

* – these still exist, right?

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

I’ll pull some reaction together now.

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

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

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

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

But it could potentially lower borrowing costs if needed.

Reuters snapped the key points:

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

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

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

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

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

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

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

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

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

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

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

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

Updated

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

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

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

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

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

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

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

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

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

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

Updated

What are households expect to make of things?

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

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

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

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

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

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

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

That sounds like a YES.

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

Updated

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

Mark Carney won’t be lured into any predictions.

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

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

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

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

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

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

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

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

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

Updated

Carney: No regrets over rate predictions

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

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

Absolutely not, Carney replies.

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

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

Updated

Onto questions:

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

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

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

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

Secondly: concerns over the emerging markets has risen.

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

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

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

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

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

Carney warns of global risks

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

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

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

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

But the UK economy is more encouraging, he adds.

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

Updated

Bank of England Press Conference begins

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

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

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

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

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

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

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

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

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

Here’s the full story:

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

It says:

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

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

Bank of England inflation report

Updated

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

Bank of England quarterly inflation report

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

It is packed with interesting charts.

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

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

The Bank says:

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

A sharp slowing in China could affect the UK economy.

Updated

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

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

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

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

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

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

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

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

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

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

The minutes say:

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

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

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

Updated

Pound hit by dovish Bank of England

DOWN GOES THE POUND.

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

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

The Bank has also cut its inflation forecasts.

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

BoE cuts growth forecasts on emerging market gloom

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

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

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

And the Bank also fears trouble in emerging markets:

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

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

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

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

Updated

Bank of England leaves rates unchanged

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

Updated

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

ONE MINUTE TO GO!

Spoiler alert:

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

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

Super Thursday: What to expect

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

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

Marketwatch’s preview has more details:

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

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

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

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

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

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

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

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

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

UK car sales
UK car sales Photograph: SMMT

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

ITV business editor Joel Hills says:

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

George Magnus

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

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

Magnus says:

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

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

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

Updated

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

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

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

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

Volkswagen UK sales fall nearly 10%

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

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

Other VW brands saw sales fall.

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

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

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

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

Updated

UK car sales fall for first time in 43 months

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

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

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

UK car sales

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

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

Just looking at the detail of the report now….

Updated

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

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

And this month, it has split 6-3, with a trio calling for a rate hike.

One of the “shadow hawks” is Simon Ward of Henderson Global Investors, who argues:

Raise. Corporate liquidity is surging. Private pay growth is over three per cent, while productivity remains sluggish. Global risks have faded.

Andrew Sentance, who once served on the MPC, also believes the BoE should raise rates:

Here’s a handy chart showing which BoE policymakers appear keen to raise rates soon, and which are reluctant….

Andy Haldane, the premier Dove, has even suggested recently that rates might be cut to new record lows….

Updated

Some economists believe that divisions at the Bank of England over interest rate policy will widen today during Super Thursday.

At recent meetings, the monetary policy committee has split 8-1, with only Ian McCafferty voting to hike borrowing costs from 0.5% to 0.75%.

But a 7-2 split can’t be ruled out, or even a 6-3 (although that might be pushing it).

And that’s why Simon Wells, chief UK economist at HSBC, says today does feel like a “big day”.

Simon Wells of HSBC
Simon Wells of HSBC (left) Photograph: Bloomberg TV

He told Bloomberg TV:

It’s Bonfire Night, and if there are fireworks here, it will be in the vote.

Kristin Forbes has been very hawkish of late, and she may go and join McCafferty, and possibly Martin Weale too.

The markets would “react strongly” to a 6-3 split, probably driving the pound sharply higher on expectations of an early rate hike.

Wells expects that first rise will come in February 2016, so the BoE may be keen to communicate that today.

Today is probably the Bank of England’s last chance to prepare people for an interest rate hike early next year.

Brian Hilliard, chief U.K. economist at Societe Generale, explains:

“It’s make or break for clear communication on a first-quarter rate increase.

“If it is going to happen in February they’re going to have to send a strong and clear signal.”

German factory orders fall again

A German supporter with the national flags on her head watches the World Cup soccer match between Germany and Ghana at a public viewing area in Hamburg, southern Germany, on Wednesday, June 23, 2010. (AP Photo/Matthias Schrader)

As if the Volkswagen scandal wasn’t bad enough, Germany’s factories have also suffered another drop in demand orders.

Industrial orders fall by 1.7% in September, new figures show, the third monthly decline in a row.

That’s rather worse than expected – economists forecast a 1% rise – and it suggests Europe’s largest economy is suffering from weaknesses overseas.

The economy ministry didn’t try to sugar-coat the figures either, saying that “overall, industrial orders are in a weak phase”.

Updated

VW sales slide in South Korea

Sign at the Volkswagen Chattanooga Assembly Plant in Chattanooga, Tennessee November 4, 2015. Volkswagen told NHTSA that it would recall about 92,000 vehicles, which are some 2015 and 2016 models of Jetta, Passat, Golf and Beetle, in the United States. REUTERS/Tami Chappell

We have firm evidence that the emissions scandal has hurt Volkswagen, from South Korea.

Sales to South Korean customers almost halved in October, new figures show, dropping below the 1,000 mark for the first time since 2011.

The Korea Automobile Importers & Distributors Association reported that VW only sold 947 cars last month, following the revelations that it used software to cheat nitrogen oxide emission tests. That’s 46% lower than a year ago, and 67% below September’s figures.

The sales collapse for Volkswagen contrasted with a 6% rise in sales of imported cars in South Korea in the same period, Reuters points out.

Have UK drivers also abandoned VW? We find out at 9am when the latest sales figures are released….

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Introduction: Bank of England rate decision, and more…

Bank of England Governor Mark Carney makes a speech at The Sheldonian Theatre in the University of Oxford on October 21, 2015 in Oxford, United Kingdom. Carney spoke about the benefits and risks of Britain’s EU membership. (Photo by Eddie Keogh-Pool/Getty Images)
Bank of England Governor Mark Carney, who will hold a press conference at 12.45pm today Photograph: Pool/Getty Images

Happy Super Thursday!

The Bank of England is preparing to hit us with a quadruple whammy of news and economic data at noon.

Firstly, the Bank’s Monetary Policy Committee will set UK interest rates. A rate rise isn’t expected, but some members of the MPC may vote for the first hike since the financial crisis began. Last month they split 8-1, but could another hawk jump the fence?

The minutes of the meeting are also released at noon, showing the details of the committee’s discussions and its views on the UK and global economy.

We also get the latest quarterly inflation report, packed with new economic forecasts.

And if that’s not enough of a treat, the Bank governor Mark Carney then holds a press conference at 12.45pm. That’s his opportunity to guide the markets – and potential housebuyers and borrowers – on the chances of an interest rate rise in early 2016.

Also coming up today….

We get new UK car sales figures for October at 9am. They are expected to show that some customers have deserted Volkswagen following its emissions crisis.

In the City, we have some disappointing results from Morrisons, which has reported its 15th straight quarterly sales fall.

And the European financial markets are expected to be calm, after a solid trading day in Asia which saw the Chinese market rise 20% above its recent low.

That means they are back into a bull market, as traders put this summer’s panic selling behind them.

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

Updated

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Prices across the single currency region were flat in October while Europe’s unemployment crisis has eased. American household spending rose by just 0.1% in September, down from 0.4% in August. Canadian economic growth slows…

 

Powered by Guardian.co.ukThis article titled “Eurozone emerges from deflation as unemployment hits three-year low – live updates” was written by Graeme Wearden, for theguardian.com on Friday 30th October 2015 13.04 UTC

The latest US economic data just hit the wires, and paints a mixed picture of the world’s largest economy.

American household spending rose by just 0.1% in September, down from 0.4% in August, and only half as fast as economists expected.

But US labour costs have risen by 0.6% during the last quarter, up from 0.2% in the previous three months. That’s a broad measure of pay, suggesting salaries are rising as the employment market continues to tighten.

US consumer spending and income

So on balance, it doesn’t really settle the debate on whether US interest rates will go up before Christmas (as covered in the intro).

Updated

Canadian growth slows in August

Digital illustration - Canadian Flag<br />C95250 Digital illustration - Canadian Flag

The global slowdown has rippled across to Canada.

Canadian GDOP rose by only 0.1% in August, data just released showed, down from 0.3% in July.

That follows this week’s trend of slowing growth in the last quarter (in the UK, the US and Spain).

It’s the third monthly expansion in a row in Canada, following contractions earlier in the year. On an annual basis, the economy was only 0.9% bigger than 12 months ago.

Updated

Over in Lisbon, Portugal’s new government is being sworn in after a general election that produced no clear winner.

It means Pedro Passos Coehlo remains as prime minister, but leading a minority government.

Portugal’s president sparked controversy by asking Passos Coehlo to form the next administration, even though left-wing parties won a majority of seats between them.

This sparked talk that a coup had been perpetrated. But in truth, the wheels of democracy will keep turning.

The opposition will get their chance to kick Passos Coehlo out of office early next month, in a vote of confidence on the new government’s policies.

Merkel has used her China trip to call for more protection for Europe’s steel industry, which has been ravaged by falling prices and overcapacity.

Over to Reuters’ Andreas Rinke:

At a German-Sino business congress in Hefei, Merkel calledfor better protection of the steel and solar industries against unfair international competition, a complaint some manufacturers make against China.

Merkel said the steel sector needed “a certain amount of market protection” as steelmakers have pointed out that environmental regulations differ from country to country,impacting cost advantages.

“I also hope that we can extend the rules already in placein the solar sector,” she added.

Updated

Angela Merkel also had an opportunity to pass on some football tips to the next generation today, during a trip to a primary school in Xin Nan Cun.

German Chancellor Angela Merkel visits China<br />epa05003214 German chancellor Angela Merkel (C) visits a physical education class in Xin Nan Cun, China, 30 October 2015. Merkel is on a two-day official visit to China. EPA/SOEREN STACHE

Updated

Angela Merkel has also predicted that China’s economy will avoid a crash, during her trip to Hefei today.

She told journalists:

“I think one can expect that China’s growth will be a bit weaker, but that it will have constant growth.

“It is obvious that particularly the domestic demand through growing cities is an important factor to stimulate consumption and here with growth.”

This is Merkel’s eighth visit to China since becoming Germany’s leader a decade ago, underlining the importance of the links between Berlin and Beijing.

Photos: Angela Merkel visits China

Angela Merkel has been hard at work building closer trade links with China.

The chancellor has put worries over Germany’s economy, and Europe’s escalating refugee crisis behind her. And the latest photos from the trip suggest it’s going well.

Merkel got a warm welcome from students at Hefei University in Hefei, capital of east China’s Anhui Province….

Students with a banner await the arrival of German Chancellor Merkel at the German University in Hefei<br />Students with a banner that reads “Good day, Mrs Merkel!” await the arrival of German Chancellor Angela Merkel at the German University in Hefei October 30, 2015. REUTERS/ JOHANNES EISELE/Pool

…and then shared a drink with Chinese Premier Li Keqiang, using beer brewed by the students #cheers

Angela Merkel visit to China - 30 Oct 2015<br />Mandatory Credit: Photo by Xinhua/REX Shutterstock (5331237b) Chinese Premier Li Keqiang (L) and German Chancellor Angela Merkel (C) drink beer brewed by Chinese and German students during their visit to Hefei University in Hefei, capital of east China’s Anhui Province Angela Merkel visit to China - 30 Oct 2015

Merkel also told reporters that Germany favours granting China “market economy status” – a shift that would make it harder for the EU to protect local industry from Chinese competition.

However, Beijing still “has to do some homework, for example in the area of public procurement,” she added (Reuters reports)

German Chancellor Angela Merkel Visits China<br />HEFEI, CHINA - OCTOBER 30: German Chancellor Angela Merkel smiles during a signing ceremony on October 30, 2015 in Hefei, China. Merkel is in Hefei, capital of east China’s Anhui Province, for a one day visit, accompanied by her Chinese counterpart Li Keqiang. (Photo by Johannes Eisele - Pool/Getty Images)

A signing ceremony in Hefei. Photograph: Pool/Getty Images

And she also met a group of children in the Baohe district of Hefei:

Angela Merkel<br />German Chancellor Angela Merkel , left, greets village children in Baohe district of Hefei, China, Friday, Oct. 30, 2015. (Johannes Eisele/Pool photo via AP)

Updated

European Central Bank (ECB) president Mario Draghi addresses a news conference after a meeting of the ECB Governing Council in St Julian’s, outside Valletta, Malta, October 22, 2015. European Central Bank President Mario Draghi said on Thursday monetary policy alone cannot solve the euro zone’s economic problems and called on member countries to take additional actions alongside. REUTERS/Darrin Zammit Lupi MALTA OUT. NO COMMERCIAL OR EDITORIAL SALES IN MALTA

European Central Bank (ECB) president Mario Draghi. Photograph: Darrin Zammit Lupi/Reuters

Mario Draghi will be pleased to see the eurozone clamber out of deflation this month, but it only takes a little pressure off his central bank.

Last week, the ECB chief hinted that more stimulus could be needed soon, as inflation remained sharply off course.

Bill Adams, senior international economist at PNC Financial Services Group, believes Draghi will make an announcement at its next meeting:

The ECB’s most likely next move is to announce an extension in December of the duration of its quantitative easing program to last through March 2017. But hawks on the Governing Council may point to an exit from deflation as a reason for the ECB to continue with asset purchases in 2016, but without as clear a pre-commitment as they made in 2015.

This would provide the ECB with discretion to begin a taper of its easing program earlier than expected if inflation surprises to the upside due to pass-through of higher import prices or higher food prices (unprocessed food prices rose 3.0% from a year earlier in October).

No time like the present, eh?….

Updated

European Union jobless rate hits six-year low

Unemployment in the wider European Union has hit a six-year low of 9.3%, even better than the 3.5 year low of 10.8% in the eurozone:

But that still leaves 22.631 million men and women out of work in the 28 countries which make up the EU.

Eurostat explains:

The EU28 unemployment rate was 9.3% in September 2015, down from 9.4% in August 2015, and from 10.1% in September 2014. This is the lowest rate recorded in the EU28 since September 2009.

But this is still far, far too high — almost twice the levels in the UK and the US.

And many countries are still lagging behind.

The highest rates were recorded in Greece (25.0% in July 2015) and Spain (21.6%) — a reminder that the Spanish recovery hasn’t fully fed through to its labour market.

The lowest were recorded in Germany (4.5%), the Czech Republic (4.8%), Malta (5.1%) and the United Kingdom (5.3% in July 2015).

Updated

It’s almost a year since oil prices began to tumble on the world markets, giving the global economy a deflationary squeeze.

The impact of cheap oil should soon start to drop out of the annual inflation rates, though (as prices will no longer be cheaper than a year ago). And that could send consumer prices indices up again….

This is the second time this year that the eurozone has shaken off a bout of negative inflation:

Updated

Eurozone unemployment hits lowest since January 2012

Europe’s unemployment crisis has eased a little, in another little boost to the region.

Eurostat reports that the overall jobless rate dropped to 10.8% in September, down from 10.9% in August.

That’s lower than economists had expected, and is the lowest level since January 2012.

Although the eurozone’s inflation rate was zero in October, that masks wide differences across the economy.

Today’s eurozone inflation data shows that food prices rose by 1.5% year-on-year in October, while service sector costs were up by 1.3%.

Other goods prices only rose by +0.4%, while energy costs slumped by 8.7%.

So on average prices were unchanged (as the economist with one foot in a bucket of scalding hot water and the other foot in a bucket of ice might put it)

Eurozone inflation rises to 0.0%

The eurozone has emerged from deflation!

Prices across the single currency region were flat in October, having shrunk by 0.1% the previous month.

That’s broadly in line with forecast, and shows how little inflationary pressure there is in the eurozone (due to weak energy prices).

Core inflation (which strips out volatile elements such as energy and food) across the eurozone rose to 1% – well below the ECB’s 2% target.

Updated

European stock markets are subdued this morning, as investors wait for the latest eurozone inflation and unemployment data in 25 minutes.

The FTSE 100 has lost 5 points, or just under 0.1%, while the French and German markets are up just 0.15%.

But still, fears that we could suffer a grim October have not come to pass, with most indices posting strong gains this month:

Looking back at Japan…some economists believe the BoJ may beef up its stimulus package in November, when it meets again.

By then, they should have new growth figures showing whether Japan’s economy shrank in the last quarter, or not.

Mitsuo Shimizu, deputy general manager of Japan Asia Securities Group, says:

“They could move after the next meeting – expectations for more easing aren’t going away.”

But there’s also an argument for waiting until the US central bank’s next meeting in December. If the Fed does hike interest rates, then the yen will weaken against the US dollar without the BoJ needing to do anything….

Italy’s unemployment rate has dipped to its lowest point since January 2013 but still remains worryingly high.

New data shows that the Italian jobless rate fell to 11.8% in September, from 11.9% in August, suggesting prime minister Matteo Renzi’s reform plan may finally be bearing some fruit.

It’s better than economists expected.

In 50 minutes time we get the overall eurozone unemployment report….

Updated

Spain’s recovery has been partly due to a strong tourist season, which helped it overcome the housing crash.

The FT’s Ian Mount explains:

Record spending by foreign tourists has helped speed Spain’s recovery from a double dip recovery that began after its real estate bubble popped in 2008.

Tourists injected €53.8bn into the economy over the first nine months of 2015, 6.3 per cent more than in the same period in 2014.

Capital Economics fears that today’s GDP report shows Spain’s ‘impressive’ recovery is faltering a little:

Holger Sandte of Nordea Markets is concerned that Spain’s building and housing sector is still in the mire:

Spanish GDP up by 0.8% as recovery continues

Spain’s economic recovery continues, although at a slightly lower speed.

The Spanish statistics body reports that GDP rose by 0.8% in the last three months, compared to 1% in the second quarter of this year.

On an annual basis, the economy grew by 3.4%, up from 3.1%.

This is the 9th consecutive quarter of growth in Spain, which has been one of the best performing European economics since the debt crisis eased in 2012.

Spanish GDP

Spanish GDP Photograph: Spanish statistics office

Spain is the first eurozone country to report growth figures (we get most of the data in two weeks time).

Today’s numbers mean it is growing faster than the UK, which reported a GDP increase of 0.5% on Tuesday. It also beats America’s annualised rate of 1.5% (which is <0.4% on a quarter-on-quarter basis).

Reaction to follow….

Kuroda predicts moderate recovery for global economy

Governor Kuroda is also trying to dampen fears over China’s economy, and its impact on Japan.

He says he agrees with the IMF that the slowdown in China could last longer than expected, which would be bad for Japanese trade:

Many Japanese companies operate in East Asia so their profits may also be affected.

But he’s still optimistic that the region’s economies are resilient enough to cope:

Our main scenario is for the global economy to recover moderately, driven by the strength in advanced economies.”

Here’s some instant reaction to BoJ governor Haruhiko Kuroda’s comments:

BoJ’s Kuroda: We won’t hesitate to do more

The Bank of Japan (BOJ) building in Tokyo, October 30, 2015. The Bank of Japan held off on expanding its massive stimulus program on Friday, preferring to save its dwindling policy options in the hope that the economy can overcome the drag from China’s slowdown without additional monetary support. REUTERS/Thomas Peter

The Bank of Japan (BOJ) building in Tokyo today. Photograph: Thomas Peter/Reuters

The Bank of Japan has fuelled speculation that it could soon announce fresh stimulus measures, after cutting the Bank’s inflation and growth forecasts.

Governor Haruhiko Kuroda has just told a press conference that the BoJ has more ammunition at its disposal, as it battles against the deflationary pressures gripping the globe.

Kuroda insisted that the BoJ could still hit its target of getting inflation to 2% (even it is is taking longer than hoped), saying:

“We won’t hesitate to make necessary policy adjustments if we judge that there is a change in the broad price trend.”

“I’m not thinking of raising or lowering the current 2% inflation target.”

And on the details of monetary policy, Kuroda declared:

“I don’t think there are limits to our policy options.”

Kuroda was speaking after the BoJ left its current stimulus programme unchanged at its latest policy meeting, despite evidence that Japan hasn’t shaken off the spectre of deflation.

The BoJ also cut its forecast for real economic growth for the current fiscal year to 1.2% from 1.7%. It also kicked back the target for hitting 2% inflation to the back end of 2016, or even early 2017, from the middle of next year.

Some analysts had thought the Bank might boost its 80 trillion yen annual asset-buying scheme today, but Japan’s policymakers are hopeful that the global economy will pick up.

But there are signs that more may be needed. New figures showed that consumer prices fell 0.1% in the year to September, a second monthly decline, while household spending slid 1.3 percent from a year earlier.

More here:

Updated

The Agenda: Will eurozone emerge from deflation?

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

It looks like another busy day for economic news, as policymakers, analysts and the public all ponder the state of the global economy as the year grinds towards its close (just 55 sleeps till Christmas, folks!)

In Europe, the latest inflation data come at 10am GMT. It may show that prices stopped falling in the eurozone, after dropping by 0.1% in September.

We also get European unemployment figures – likely to show that the eurozone jobless crisis is still severe:

EU jobs

Europe’s unemployment rate has been stubbornly high since the debt crisis began Photograph: ONS

There’s also a flurry of data coming our way from across the Atlantic. That includes US personal spending stats at 12.30pm and the University of Michigan confidence report at 2pm GMT.

They’ll both provide more ammunition for the ongoing debate about whether the Federal Reserve will take the plunge and raise interest rates at its December meeting (just 47 sleeps to go!).

Canada will become the latest major economy to report growth figures – economists predict that growth slowed to 0.1% in August from 0.3% in July.

And in the City, it’s quite busy for a Friday.

BG Group, the oil company, has been hit by the weak crude price:

And Royal Bank of Scotland has suffered an operating loss of £134m in the last quarter, after taking a £847m charge to cover restructuring costs.

It still managed to post a net profit though:

More details on that later, along with all the main events through the day….

Updated

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German bosses are more optimistic about future prospects but UK factories suffer as exports fall the fastest since 2012. Portuguese government bonds are coming under some pressure today as investors react to the unfolding political crisis…

 

Powered by Guardian.co.ukThis article titled “Germany shrugs off VW crisis, but UK factory orders slide – business live” was written by Graeme Wearden, for theguardian.com on Monday 26th October 2015 13.26 UTC

Portuguese bonds hit by political crisis

Portuguese government bonds are coming under some pressure today as investors react to the unfolding political crisis in Lisbon.

While most eurozone bonds have strengthened today, Portugal has gone the other way, pushing up the yield (or interest rate) on its 10-year debt from 2.37% to 2.45%.

Portuguese 10-year bond yield
Portuguese 10-year bond yield today Photograph: Thomson Reuters

The move came after opposition parties vowed to bring down Portugal’s new government in a confidence vote later this week. They’re furious that the centre-right coalition, led by former PM Pedro Passos Coelho, has been invited to form another administration despite failing to win a majority in this month’s election.

In taking this decision, Portugal’s president Cavaco Silva has enraged some certain commentators who argue that he’s “banned” the Portuguese left-wing a fair crack at power in a massive failure for democracy.

It’s a complicated situation, though. No party won an overall majority, although Passos Coelho’s group came first with 38% of the vote. The socialists came second with 32% followed by the hard left Left Bloc with 10% and the communists with 7%.

Those three left-wing parties *could* form a majority, but instead president Silva passed the mandate to Passos Coelho. Crucially, and controversially, he also warned that the far-left parties’ anti-EU views were a threat to Portugal.

Politics lecturer Chris Hanretty has written a good blogpost here, explaining why talk of a coup in Portugal is a little simplistic.

He says:

Often, there is no right or obvious answer to the question, “who won the election?”. But if Cavaco Silva’s decision is wrong, then it will be righted automatically by the actions of Parliament in less than a fortnight’s time.

If that happens, the alarmists will have been proven wrong. Unfortunately, attention will likely have moved on.

Sam Tombs of consultancy firm Pantheon Macroeconomic fears that UK factories will continue to struggle because of the strong pound.

He’s created a chart showing how exports fall after the the pound strengthens (the inverted left-hand scale, shifted forwards nine months).

And that correlation means factory orders could continue to weaken, Tombs explains:

The chart shows that the worst is not over for the manufacturing sector; sterling’s further appreciation over the last year will continue to depress export orders until mid-2016, at least.

IHS economist Howard Archer is alarmed by the drop in UK factory orders reported by the CBI:

This is a thoroughly disappointing survey through and through which indicates that manufacturers’ struggles are intensifying as a moderation in domestic demand adds to a still weakening export outlook.

Persistent and seemingly deepening manufacturing weakness is very worrying for hopes that UK growth can ultimately become more balanced and less dependent on the services sector and consumer spending.

Factory fears as UK exports fall at fastest pace since 2012

A turbine at Alstom power plant turbine refurbishment facility in Rugby.
A turbine at Alstom power plant turbine refurbishment facility in Rugby. Photograph: Bloomberg/Bloomberg via Getty Images

More signs that UK manufacturers are having a tough time as they contend with China’s downturn and a stronger pound.

The latest survey of factory bosses by business group CBI suggests orders have dropped from both within the UK and outside. The report’s key order book balance is the weakest for more than two years.

This does not bode well for official GDP figures due on Tuesday that will give the first snapshot of UK growth in the third quarter. The consensus forecast is for quarterly growth of 0.6% in the July-September period, down from 0.7% in the second quarter, according to a Reuters poll.

The CBI’s report suggests that in the three months to October new export orders fell at the fastest pace in three years. That was possibly down to the continued strength of the pound, which makes UK goods more expensive to overseas buyers, the CBI said.

Total new domestic orders fell over the quarter for the first time since April 2013.

Manufacturing production also edged downwards during the three months to October, marking the first decline in the last two years, according to the CBI Quarterly Industrial Trends Survey.

Against that backdrop, manufacturers’ optimism about both their business situation and export prospects for the year ahead fell at the fastest pace since October 2012, according to the poll of 463 companies. But they predicted that overall manufacturing conditions will stabilise in the next three months, with a small rise in output.

Rain Newton-Smith, CBI director of economics, says UK manufacturers are being buffeted at home and abroad.

“Manufacturers have been struggling with weak export demand for several months, because of the strength of the pound and subdued global growth. But now they’re also facing pressure back home as domestic demand is easing.”

And here are the key figures from the report:

  • 22% of businesses reported an increase in total new order books and 30% a decrease, giving a balance of -8%, the lowest since October 2012.
  • 20% of businesses reported an increase in domestic orders, with 31% noting a decrease. The balance for domestic orders (-11%) was below the long-run average (-5%), the lowest since April 2013 (-14%).
  • 15% reported an increase in export orders, with 33% signalling a decrease. The resulting balance for export orders (-17%) signalled a faster decrease in orders than the historic average (-7%). This marks the lowest rate since October 2012 (-17%).

Germany’s central bank reckons that the country’s economy remains “quite strong”, despite signs that growth slowed in the last three months.

Peterson leaves Southwark Crown Court in London<br />Magnus Peterson leaves Southwark Crown Court in London October 14, 2014. Magnus Peterson, the founder of the $600 million Weavering hedge fund that collapsed in the wake of the credit crisis in 2009, pleaded not guilty to 16 fraud-related charges at his London trial on Tuesday. REUTERS/Stefan Wermuth (BRITAIN - Tags: BUSINESS) - RTR4A646
Magnus Peterson in 2014. Photograph: Stefan Wermuth / Reuters/REUTERS

Former hedge fund boss Magnus Peterson has just been banned from the City, over one of the biggest rogue trading scandals of recent years.

Peterson’s Weavering Macro Fixed Income Fund collapsed in 2009, costing investors around £350m. It had been marketed as a safe and secure investment, which investors could easily reclaim their funds from.

But once the financial crisis struck, Peterson embarked on a series of risky wagers on financial derivatives which failed to reverse its fortunes. He was convicted of several counts of fraud, after the high court heard how he had taken out $600m of swap contracts, which turned out to be worthless, with another company under his control.

Mark Steward, director of enforcement and market oversight at the FCA, says Peterson has been banned to protect consumer and markets.

“Mr Peterson defrauded investors who should have been able to trust him. Over a prolonged period he purposely used investors’ money to prop up his business, and then lied in order to cover up his deception.”

This makes little practical difference to Peterson, aged 51, right now, as he was jailed for 13 years in January.

Updated

9% hacked off TalkTalk shares after cybercrime attack

Back in the City, UK telecoms group TalkTalk is the biggest faller on the stock market after suffering a major cybercrime attack last week.

TalkTalk shares have slumped by around 9.5% this morning. Last week, the firm admitted that customers’ personal and financial details could have been stolen by cybercriminals who breached its security systems.

TalkTalk boss Dido Harding told my colleague Josh Halliday last night that it’s too early to say if the company will compensate those affected.

She also argued that TalkTalk’s security was better than its rivals, despite the breach:

“Nobody is perfect. God knows, we’ve just demonstrated that our website security wasn’t perfect – I’m not going to pretend it is – but we take it incredibly seriously.

“On that specific vulnerability, it’s much better than it was and we are head and shoulders better than some of our competitors and some of the media bodies that were throwing those particular stones.”

And despite criticism from shareholders, Harding is determined to hold onto her job:

Updated

IFO: German car industry unfazed by VW scandal

IFO economist Klaus Wohlrabe has confirmed that Germany’s auto industry is shrugging off the revelations that VW deliberately cheated on emissions tests.

Speaking to Reuters about today’s IFO report, Wohlrabe pointed out that business expectations and the assessment of current conditions in the sector had both improved this month.

That helped to push IFO’s measure of business confidence higher this month, from 103.3 to 103.8.

Wohlrabe says:

The German automobile industry appears to be unfazed by the VW scandal.

Updated

German business leaders aren’t frightened by the crisis at Volkswagen, and the slowdown in emerging markets, explains Carsten Brzeski of ING.

Here’s his analysis on today’s IFO report:

Surprised but not frightened? German businesses showed an interesting reaction to the recent series of uncertainties and turmoil. In fact, the reaction can be summarized as impressed but not frightened.

Germany’s most prominent leading indicator, the just released Ifo index dropped to 108.2 in October, from 108.5 in September. The first drop since June this year. Interestingly, the drop was exclusively driven by a weaker assessment of the current situation. The expectation component, on the other side, increased to 103.8, from 103.3, continuing its recent positive trend and actually reaching the highest level since June last year.

Of course, one should not interpret too much in a single confidence indicator but today’s Ifo reading suggests that the German business community is filing the Volkswagen scandal as a one-off and also shrugs off the risk from a possible Chinese and emerging markets slowdown. Despite these external uncertainties and regular concerns about the real strength of the German economy, German business remain highly optimistic.

There are two possible explanations for this trend: either German businesses are naive optimists or ice-cold realists, sticking to the facts. In our view, there are many arguments in favour of the latter.

Updated

The euro is slightly higher following the IFO survey:

Updated

German IFO survey: What the experts say

Today’s German business confidence survey shows Europe’s powerhouse economy remains in decent health, say City experts.

Economist Frederik Ducrozet is encouraged by the rise in business expectation this month:

Die Welt’s Holger Zschaepitz points out that confidence in the German carmaking industry rose this month:

Bloomberg’s Maxime Sbaihi points out that demand within Germany is still robust:

Updated

German business climate worsens, but expectations rise

Business conditions in Germany have fallen this month, according to the latest survey of corporate confidence in Europe’s latest economy.

The IFO thinktank has just reported that current conditions in the German economy have deteriorated this month, for the first time in four months.

But IFO also found that business leaders are more upbeat about future prospects than in September. That suggests the VW emissions scandal has not caused major trauma.

IFO’s business climate index fell to 108.2 in October, down from 108.5 in September, but rather higher than expected.

The current conditions index fell to 112.6, from 114 a month ago. That suggests that business leaders are finding life a bit harder — after seeing exports and factory orders deteriorate over the summer.

But the expectations index rose to 103.8, from 103.3, indicating that Germany PLC expects to ride out the slowdown in China and other emerging markets, and the Volkswagen saga.

I’ll mop up some reaction now…

Updated

Speaking of carmakers…Japan’s Toyota has overtaken Germany’s Volkswagen to become the world’s largest carmaker.

Toyota has reported that it sold almost 7.5 million cars in the third quarter of 2015, while VW sold 7.43m.

Does that show that the diesel emissions scandal has hurt VW? Not really — that news only broke in mid-September, giving little opportunity for it to show up in these figures.

But it does show that VW may already have been finding life tougher, even before admitting that around 11 million vehicles were sold with software to trick emissions tests.

(FILES) - The logo of French car maker PSA Peugeot is seen on a car parked in front of French Economy minstry (left) in Paris, on September 11, 2012. French auto giant PSA Peugeot Citroen’s worldwide sales in 2012 dropped by 16.5 percent in 2012 due to contracting demand in debt-crippled southern Europe and the suspension of its activities in Iran, it said in a statement on January 9, 2013. AFP PHOTO JOEL SAGETJOEL SAGET/AFP/Getty Images

Shares in French carmaker Peugeot are down 2% this morning, after reporting a 4.4% drop in sales in China and South East Asia.

That took the shine off a 3.8% rise in sales in Europe.

WPP: business leaders remain ‘risk averse’

Sir Martin Sorrell, WPP chief executive, hides his head in his hand.

Advertising titan WPP is among the biggest fallers in London, down around 2%, despite reporting a 3.3% rise in net sales in the last six months.

Traders may be discouraged by a warning that “risk averse” business leaders are reluctant to stick their necks out too far, given the current geopolitical tensions.

WPP told shareholders that:

Country specific slowdowns in China and Brazil and geopolitical issues remain top of business leaders’ concerns. The continuing crisis in the Ukraine and consequent bilateral sanctions, principally affecting Russia, continued tensions in the Middle East and North Africa and the risk of possible exits from the European Community, driven by further political and economic trouble in Greece, top the agenda.

Corporate bosses are also facing a two-pronged squeeze — from new technology rivals on one side, and cost-cutting activists on the other, WPP added:

If you are trying to run a legacy business, at one end of the spectrum you have the disrupters like Uber and Airbnb and at the other end you have the cost-focused models like 3G in fast moving consumer goods, and Valeant and Endo in pharmaceuticals, whilst in the middle, hovering above you, you have the activists led by such as Nelson Peltz, Bill Ackman and Dan Loeb, emphasising short-term performance.

Not surprising then, that corporate leaders tend to be risk averse.

European markets in muted mood

As predicted, Europe’s stock markets have fallen into the red this morning.

The FTSE 100 has shed arounds 33 points, or 0.5%, as Tony Cross of Trustnet Direct, explains:

It has been a surprisingly muted overnight session in Asia with markets showing little reaction to Friday’s rate cut news out of China.

London’s FTSE-100 is failing to find any inspiration off the back of the news either, with the vast majority of stocks mired in red ink shortly after the open.

The other main markets are also down, apart from Germany’s DAX which is flat.

European stock markets, early trading, October 26 2015
European stock markets in early trading today. Photograph: Thomson Reuters

Mining and energy stocks are generally lower, showing that concerns over global growth haven’t gone away.

Connor Campbell of SpreadEx says:

The FTSE, falling by around 25 points soon after the bell, was weighed down by (what else?) its mining and oil stocks, with investors seemingly less sure about the Chinese rate cut than they were last Friday

Larry Elliott: Why China’s interest rate cut may be bad news for the world economy

By cutting interest rates, China’s central bank risks creating further instability in a global economy that is already hooked on ultra-cheap money and regular hits of stimulus.

As our economic editor Larry Elliott explains, such stimulus measures may already be less effective too:

Problem number one is that by deliberately weakening their exchange rates, countries are stealing growth from each other. Central banks insist that this does not represent a return to the competitive devaluations and protectionism of the 1930s, but it is starting to look awfully like it.

Problem number two is that the monetary stimulus is becoming less and less effective over time. There are two main channels through which QE operates. One is through the exchange rate, but the policy doesn’t work if all countries want a cheaper currency at once. Then, as the weakness of global trade testifies, it is simply robbing Peter to pay Paul.

The other channel is through long-term interest rates, which are linked to the price of bonds. When central banks buy bonds, they reduce the available supply and drive up the price. Interest rates (the yield) on bonds move in the opposite direction to the price, so a higher price means borrowing is cheaper for businesses, households and governments.

But when bond yields are already at historic lows, it is hard to drive them much lower even with large dollops of QE. In Keynes’s immortal words, central banks are pushing on a piece of string….

Here’s Larry’s full analysis on the rate cut:

Copper, a classic measure of the health of the global economy, hasn’t benefitted much from China’s rate cut. It’s only up by 0.2% this morning.

Chinese officials to agree next five-year plan

China is also in the spotlight today as top communist officials gather to hammer out its 13th five-year plan, setting the country’s economic programme until 2020.

Premier Li Keqiang has already indicated that slower growth is on the agenda, by declaring that Beijing will not “defend to the death” its target of 7% growth (which was narrowly missed in the third quarter of 2015).

He declared:

“We have never said that we should defend to the death any goal, but that the economy should operate within a reasonable range.”

Trade links and green issues will also be discussed, as China’s top brass try to manage the country’s economic rebalancing.

With China easing monetary policy last week, and the ECB expected to follow suit in December, it could soon be Japan’s turn to stimulate its economy again….

No jubilation in Hong Kong either, where the Hang Seng index just closed 0.2% lower.

Asian market creep higher after Chinese rate cut

Investors in Asia have given China’s interest rate cut a cautious reception overnight, but there’s no sign of euphoria.

In Shanghai, the main index of Chinese shares rose by just 0.5%, or 17 points, to 3430. Although Friday’s stimulus move has been welcomed, traders are also worrying about whether China is still going to suffer a hard landing.

Said Zhang Qi, an analyst at Haitong Securities in Shanghai, says shares got a small lift from the rate cut:

“But the market appeared to be in correction after it rose a lot in October, and some investors sold stocks on the short-lived rise from the rate cuts. So overall, the market stayed stable today.”

Japan’s Nikkei gained around 0.7%, but the Australian S&P market dipped a little despite hopes that its mining sector would benefit from Chinese stimulus moves.

Asian stock markets, October 26
Here’s the situation across Asia’s stock markets Photograph: Thomson Reuters

Updated

The agenda: Investors await German confidence figures

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

Today we’ll find out whether business confidence in Germany has been badly hit by the Volkswagen saga, and the slowdown in emerging markets.

The latest IFO survey, due at 9am GMT, is expect to show that German firms are gloomier about their prospects. That’s understandable, given the drop in German exports, factory output and orders in August.

We’ll also be mopping up the reaction to China’s interest rate cut, announced late last week.

That did give shares a boost on Friday afternoon, but European stock markets are tipped to fall back this morning, as concerns over the situation in China reemerge.

China’s rate cut came just a day after the European Central Bank hinted that it could boost its stimulus package soon, so investors have lots to ponder.

China cuts interest rates in surprise move – as it happened

In the corporate world, traders are digesting results from advertising giant WPP and French carmaker Peugeot.

And we’ll also be keeping an eye on Portugal, where the president has dramatically asked centre-right leader Pedro Passos Coelho to form another government, rather than two eurosceptic left-wing parties.

Portugal Government Fuels Debate About Democracy in Europe

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

Updated

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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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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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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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Alexis Tsipras and his party have returned to power with a mandate to govern Greece and implement the bailout deal. Syriza officials said the party would seek to form a stable government immediately with the aim of maintaining confidence in the country…

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How well did Syriza and Alexis Tsipras do?

With 99.5% of the votes counted, Syriza had 35.5% of the vote, easily beating the centre-right New Democracy, the next biggest party on 28.1%. After Tsipras disappointed supporters by accepting a harsh eurozone-led austerity programme finalised in August, leftwingers appeared to be deserting Syriza, with polls showing New Democracy level just two weeks ago. But Syriza will now have 145 seats in the 300-member parliament – just four fewer than when Tsipras took power in January. Its share of the vote is also less than one percentage point down on its 36.3% share in January, although turnout was put at a record low of 55.6%.

What next for Syriza and Alexis Tsipras?

Syriza officials said the party would seek to form a stable government immediately with the aim of maintaining confidence in the country. Its former coalition partner, the small anti-austerity rightwing Independent Greeks party, is ready to use its 10 seats to forge a power-sharing agreement with Syriza. Independent Greeks’ leader, Panos Kammenos, joined Tsipras on stage to celebrate the result. Tsipras claimed the result gave him a mandate to govern and that he intended to serve a full term, promising relief for voters weary from five elections in six years.

Does this change the bailout deal with the EU?

No. Syriza campaigned on a pledge to implement the €86bn (£63bn) bailout, while pledging measures to protect vulnerable groups from some of its effects. In exchange for the bailout funds, Tsipras agreed to deficit-reduction measures including tax rises, changes to pensions and social welfare cuts. Other aspects include labour market reform, liberalisation of consumer markets and fewer perks for civil servants. Tsipras’s first task will be to persuade EU lenders that Greece has taken enough agreed steps to ensure the next payment. The bailout programme is up for review next month.

Could the IMF decline to join the bailout?

Yes. The International Monetary Fund has said it will refuse to take part in the bailout unless there is an “explicit and concrete” agreement on debt relief for Greece. The IMF has argued that Greece cannot bear the full burden of the austerity programme and that its creditors should include debt relief in the package. Without a long moratorium on repayments, perhaps of 30 years, or a reduction in the value of the debt, the burden will become unmanageable, the IMF has argued.

Will Greece need another bailout anyway?

Greece might need another rescue. Tsipras hopes Syriza’s electoral victory will give him renewed clout to negotiate debt relief and less onerous austerity measures from Greece’s creditors. But that stance will not be popular with Germany or European institutions that imposed draconian measures on Greece in the name of fiscal discipline. If Tsipras is unable to extract significant concessions, the economy will remain weak, endangering deficit-reduction targets in the current deal and potentially requiring another bailout to head off a debt default.

What do the markets think?

Reaction in financial markets was muted on Monday morning. The euro was little changed while Britain’s FTSE 100 share index, which has gyrated in the past in reaction to Greek events, rose slightly. The yield on Greek two-year bonds fell a little, meaning traders think the risk of default is reduced. Simon Smith, chief economist at the currency trader FxPro, said: “The immediate impact has been minimal, the single currency opening little changed versus Friday’s opening levels. In the wider picture, it’s not going to make life any easier for the likes of the EU, IMF and European Central Bank and the negotiations surrounding debt sustainability over the coming months.”

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