HICP

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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USA 

World markets at their highest since August as investors calculate that the US central bank won’t raise rates this month, and probably not until 2016. Eurozone inflation gauge dips back into negative territory, placing the euro under pressure…

 

Powered by Guardian.co.ukThis article titled “World stock markets hit two-month highs as stimulus hopes build – business live” was written by Graeme Wearden (until 13.45) and Nick Fletcher, for theguardian.com on Friday 16th October 2015 13.21 UTC

US industrial production slips in September

Every piece of US data is now watched carefully to see how it might influence the US Federal Reserve in its interest rate policy.

But there is not too much to glean from the latest figures. US industrial production dipped 0.2% in September, in line with expectations. August’s figure was revised to show a 0.1% decline compared to the 0.4% fall originally reported.

Weakness in the oil and gas sector was mainly responsible for the fall.

Later comes the Michigan consumer confidence survey.

Now here’s an admission. Credit Suisse has said its clients have no idea what is going on out there in the markets. They are “lost and bearish.” The bank says:

Never have we seen so many clients who just do not know what is happening and have cashed up. US investors, in particular, were clearly cautious. European and especially Asian investors were more constructive.

Reasons for the bearishness: Global growth being at ‘growth recession’ levels, China, QE running out of steam, the rise in non-energy high yield credit spreads, the risk of the Fed policy mistake (with most clients believing, correctly in our opinion, that a December rate rise would be a policy mistake and see Yellen’s communication as being poor), US equities being expensive on ‘normalised’ earnings and the 4-week moving average of earnings revisions falling close to a 4-year low.

Two new concerns often cropped up: (i) the $0.5trn decline in global foreign exchange reserves, with this being likened to monetary tightening…[But] 80% of the decline is due to China, where the fall is largely being sterilised. (ii) The rising political tide against profits (living wage in the UK, the BEPS OECD initiative on corporate taxation).

What was not mentioned: Eurozone politics, US debt ceiling, Russia’s involvement in Syria or the UK referendum on the EU.

In sum, we think clients are focused more on risks, which are abnormally high, rather than reward, which is also high, with the equity risk premium, for example, at 5.8%. We would agree, however, that visibility is abnormally low.

Chinese investors, 16 Oct 2015.

Chinese investors appear to have regained their appetite for risk.

The Shanghai Composite Index gained 6.5% this week, helped by speculation that Beijing might do more to stimulate its economy.

Some bolder traders have been borrowing more money to buy shares, anticipating that markets are going to rally this autumn.

Xiao Shijun, an analyst at Guodu Securities, explains (via the WSJ):

“Some medium- to long-term investors are betting that the market has bottomed and thus are more confident to add leverage.”

And there are signs that the authorities have relaxed their recent clampdown on lending, which was imposed to calm excessive speculation.

China’s outstanding margin financing has risen 5.6% since the start of the month and looks to have bottomed, according to IG’s Angus Nicholson.

16 Oct 2015, Nanjing, Jiangsu Province, China --- Chinese investors look at prices of shares (red for price rising and green for price falling) at a stock brokerage house in Nantong city, east China’s Jiangsu province, 16 October 2015.

Ever wondered what you have to do to get banned from the City?

Well, running up losses of £1.4bn through rogue trading will do the trick.

The Financial Conduct Authority – Britain’s City watchdog – has declared today that former UBS trader Kweku Adoboli cannot work in the industry again after demonstrating “a clear and serious lack of honesty and integrity.”

It added:

“In reaching its decision, the FCA has considered all the relevant circumstances and the severity of the risk posed by Mr Adoboli to consumers and financial institutions, and to confidence in the market generally.”

Adoboli was released from prison this summer, having been sentenced to seven years in 2012 for Britain’s biggest ever fraud. He is now fighting efforts to deport him to Ghana, where he was born in 1980.

Updated

The Bank of England building on Threadneedle Street in the City of London.

Kristin Forbes’ speech today highlights that the Bank of England’s interest rate-setting committee is split into several camps, even though it voted 8-1 to leave borrowing costs unchanged last week.

IHS’s Howard Archer has broken them down:

The current position seems to be that Ian McCafferty is already voting for interest rate hike from 0.50% to 0.75%, while Kristin Forbes and (seemingly still) Martin Weale both believe interest rates need to rise before long.

In contrast, Andy Haldane and Gertjan Vlieghe are clearly far off from voting for a rate hike while Ben Broadbent has also recently indicated that he is some way off from such a move.

That leaves governor Mark Carney, and deputy governors Minouche Shafik and Jon Cunliffe in the centre ground.

Updated

Bank of England’s Forbes: Emerging market doom and gloom is “overblown”

Professor Kristin Forbes joined the Monetary Policy Committee of the Bank of England in July of 2014. http://www.bankofengland.co.uk/about/Pages/people/biographies/forbes.aspx

Professor Kristin Forbes.

Capping off a busy week for views out of the Bank of England’s rate-setting committee, Kristin Forbes is giving a speech in Brighton.

The key message for markets from Forbes is that the next move in rates is up and is not too far off.

That puts her at odds with the Bank’s chief economist Andy Haldane who has raised the prospect of the next move being down, even further below the current record low Bank rate of 0.5%.

Forbes says, however, that pessimism about the global economy is overdone.

Forbes, who is also professor of Management and Global Economics at MIT’s Sloan School of Management, told the Brighton and Hove Chamber of Commerce that:

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

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

“Of course, if some of the potential risks to emerging markets play out – such as a sharper slowdown than expected or financial crisis of some type – then the UK economy is unlikely to be immune. But based on what has actually occurred to date, the limited direct exposure of the UK to emerging markets (even when incorporating second-round effects through other countries such as Germany), appears manageable. This is especially true when considered relative to the strength of the UK’s domestic-led expansion – which shows all signs of continuing, even if at a more moderate pace than in the earlier stages of the recovery.”

At its last meeting, the Bank’s Monetary Policy Committee (MPC) left rates at a record low of 0.5%. But one of the nine rate-setters, Ian McCafferty, voted for a rate rise. Perhaps Forbes will be joining him soon….

Updated

El-Erian: Fed could hike in December

Investors who believe the Federal Reserve won’t raise rates this year could be making a mistake, argues Mohamed El-Erian, the chief economic adviser at Allianz.

El-Erian, former CEO of bond-trading giant Pimco, believes that that Janet Yellen and colleagues could take the plunge at their meeting in December, given the strength of the US jobs market.

He’s written his views up for Bloomberg. Here’s the conclusion:

After a frustratingly slow post-crisis start, the U.S. economy has had an impressive run of job creation. But further progress is dependent on important structural issues that are not easily addressed by Fed policy.

Meanwhile, wage and inflation pressures are starting to build, though in a rather modest fashion. And concerns about excessive risk-taking — an unintended side effect of the central bank’s prolonged use of unconventional monetary policy — are far from settled.

Taken together, this suggests that, even though an October rate hike can almost certainly be discounted, it would be premature to entirely rule out action by the Fed in December, let alone to predict it would be postponed until March of next year. Only a lot more signs of weakness in the domestic economy, as well as a return of global financial market instability, would make that a sure bet.

World markets hit two-month high on stimulus hopes

FTSE 100 slump<br />A city worker walks past a stock ticker screen at the London Stock Exchange in the City of London. PRESS ASSOCIATION Photo. Picture date: Tuesday August 25, 2015. The FTSE 100 Index bounced back above the 6,000 mark after surging by nearly 2% as it recovered following one of its worst sessions in recent years. See PA story CITY FTSE. Photo credit should read: Philip Toscano/PA Wire

World stock markets have hit their highest levels since August, driven by predictions that US interest rates are staying low for a while yet.

The main European indices have all gained nearly 1% this morning, following those gains in Asia overnight and a rally on Wall Street yesterday.

That has pushed the MSCI World Index up by 1.38% to levels not seen since August 21.

MSCI World Markets index

MSCI World Markets index Photograph: Thomson Reuters

Global markets have now gained 6% in October. So unless there’s a major reverse next week, the MSCI will post its best month since 2011.

That’s quite a bounceback from this summer’s turmoil, which saw around $11 trillion wiped off global stocks.

The prospect of more ultraloose monetary policy, plus a little more calm over China’s slowdown, are pushing shares up.

Jasper Lawler of CMC Markets says traders are anticipating more stimulus in Europe and China, rather than worrying about the Fed whipping away the punchbowl with an early rate hike:

Hopes of a delayed rate hike in the US and additional stimulus from Europe and China is helping global stock markets finish the week on a high. Shares across Asia have hit a two month high while the Shanghai Composite is setting up for its best weekly performance since early June.

Weak US inflation data, albeit above expectations, further bruised the case for a Federal Reserve rate rise. Markets are looking ahead to next week when the ECB meeting and China’s GDP report provide opportunities for the European Central Bank and the People’s Bank of China to increase stimulus.

Here’s the situation.

  • FTSE 100: up 0.8% or 49 points at 6,388
  • German DAX: up 0.86% or 86 points at 10,151
  • French CAC: up 0.8% or 38 points at 4,713
  • Japan’s Nikkei: Closed up 1.1% or 194 points at 18,291
  • China’s Shanghai Composite: Closed up 1.6% or 53 points at 3,391.

Uber is not illegal, rules High Court

Minicab-hailing app Uber has just won a victory in the high court.

A judge has ruled that its GPS technology does not break violate the Private Hire Vehicles (London) Act 1998 bans private hire cars from being equipped with taximeters.

My colleague David Hellier explains:

Had it lost the case, the company would have been forced to change its service to comply with rules that protect traditional black-cab drivers.

Here’s the full story:

Eurozone back in negative inflation

It’s official, the eurozone has slumped back in negative inflation again, intensifying pressure on the European Central Bank to act.

Eurostat has confirmed that prices across the euro area fell by 0.1% in September, down from an inflation rate of +0.1% in August.

Eurozone deflation

Eurozone deflation Photograph: Eurostat

The decline is mainly due to weak energy prices. Cheaper oil is driving down the costs of fuel — good news for consumers and business, but it does drag the eurozone inflation rate further from the 2% target.

Howard Archer of IHS Global Insight explains:

This marked the first deflation since March and was down from consumer price inflation of 0.1% in August and 0.3% in May.

A marked relapse in oil prices and very weak commodity prices first undermined and then reversed the upward trend in Eurozone consumer prices that had seen it move from deflation of 0.6% in January to inflation of 0.3% in May.

The ECB has already said it could boost its bond-buying stimulus programme if needed. And with prices falling in many eurozone countries, it could be prompted to act soon:

Britain’s John Lewis has reported underwhelming sales for the last week – with takings at its department store flat year-on-year.

But within the figures, there’s a trend of customers revising the horrors delights of the 1970s, with strong demand for knitted pouffes and platform shoes. Homeowners are even painting their rooms in brown and orange, risking terrifying flashbacks for those of a certain age.

Hugo Boss shop. Shopping. Glasgow, Scotland, UK 15th February 2005 COPYRIGHT PHOTO BY MURDO MACLEOD menswear clothes All Rights Reserved Tel + 44 131 669 9659 Mobile +44 7831 504 531 Email: m@murdophoto.com STANDARD TERMS AND CONDITIONS APPLY see for details: http://www.murdophoto.com/T%26Cs.html No syndication, no redistrubution, repro fees apply.

Hugo Boss shares are being bashed this morning, after it become the latest fashion chain to suffer from the Chinese slowdown.

They fell by 8.5% in early trading, after the German fashion firm cuts its profit and sales outlook. It blamed a slowdown in China, echoing Burberry on Thursday.

Hugo Boss also revealed that sales growth in the US has dropped too, due to weaker spending by tourists. That suggests the strengthening dollar is hurting, leaving overseas visitors with less to spend.

Nestlé hit by noodles recall

Nestle Chief Financial Officer Francois-Xavier Roger addresses a news conference at the company headquarters in Vevey, Switzerland, October 16, 2015. Nestle, the world’s largest packaged food company, lowered its full-year outlook on Friday, as a Maggi noodle recall in India knocked sales and undercalculated U.S. Skin Health rebates weighed on the Swiss company’s profits. Sales dropped 2.1 percent to 64.9 billion Swiss francs ($68 billion) in the nine months through September, missing analysts’ average forecast of 65.9 billion in a Reuters poll. REUTERS/Denis Balibouse

Food giant Nestlé is missing out on today’s rally, after missing sales forecasts and cutting its outlook.

Shares in Nestlé are down 2% today, with investors disappointed that revenue has fallen by 2.1% in the first nine months of the year.

The Swiss firm also cut its 2015 outlook to around 4.5%, below its long-term target of between 5% and 6%.

Nestlé suffered emerging market from weakness in China, and also a major food recall in India. In June, Indian regulators slammed its Maggi instant noodle products as “unsafe and hazardous”.

Updated

TO GO WITH AFP STORY BY JEAN-MICHEL HAUTEVILLE (FILES) A photo taken on March 7, 2012 shows partly built Volkswagen cars are seen traveling overhead at the assembly line for the VW Tiguan and Touran models in Wolfsburg, central Germany. German multinational automotive manufacturing group is headquartered in Wolfsburg. Three weeks after the Volkswagen pollution cheating scandal the companies supplying parts to VW and also the Association of German Metal Traders VDM are fearing consequences for their business. AFP PHOTO / ODD ANDERSENODD ANDERSEN/AFP/Getty Images

A Volkswagen assembly line in Wolfsburg, central Germany. Photograph: Odd Andersen/AFP/Getty Images

The diesel emissions scandal appears to have cost Volkswagen some ground in the European auto sector.

New figures released this morning showed that car registrations rose for the 29th month running, as the industry continued to recover from the dark days of the eurozone debt crisis.

European car sales

European car sales Photograph: Thomson Reuters

Total sales jumped by 9.8% in September, but Volkswagen only sold 8.3% more cars compared to a year ago.

This cut VW’s market share to 23.3%, down from 23.7%.

That’s not a major decline – but remember that the emissions scandal only broke in mid-September, so this could be just the start….

Back in Shanghai, the Chinese stock market has hit a seven-week high as fears over its economy recede a little.

The Shanghai Composite jumped 1.4% today, suggesting traders aren’t too worried about Monday’s growth figures:

European stock markets are putting recent turbulence behind them.

The main indices are all up in early trading, with Britain’s bluechip FTSE 100 index jumping by 34 points of 0.5%. That means the Footsie has gained over 5% in October.

Here’s the situation:

European stock markets, October 16 2015

European stock markets, October 16 2015 Photograph: Thomson Reuters

European markets are now on track for their longest series of gains since April, points out Mike van Dulken of Accendo Markets.

He adds:

This remains driven by weak/mixed macro data from China, US and Europe delaying expectations for a Fed rate hike and high hopes of additional global stimulus which is considered positive for risk appetite.

Yesterday’s US inflation data is also helping to push money into shares.

Prices fell by 0.2% month-on-month in September, leaving the price of living unchanged year on year.

“Money managers are saying it looks increasingly like the Fed will not hike because the data around the world is coming in weak,” Mads Pedersen, head of global asset allocation at UBS Wealth Management, told the Wall Street Journal.

“Lukewarm data is good for equities again, just like it has been for most of this recovery.”

A flurry of weak corporate data in recent days has left most economists convinced that the Fed won’t raise interest rates at its monetary policy meeting later this month.

This week we’ve seen falling profits at Goldman Sachs, a profit warning from Walmart, and even falling demand for high end Winnebagos as US consumers cut back.

And earlier this month, the US employment figures were a big disappointment – with much fewer new jobs created than expected (just 142,000).

That doesn’t add up to the first rise in US interest rates since the financial crisis began.

David Levy, portfolio manager at Kenjol Capital Management, explains:

“Investors are reacting to the increasing likelihood that the Fed rate hike, which had been expected just a month ago in September, now likely won’t happen during the course of this year.”

There’s also talk in the markets that the Chinese government could announce fresh stimulus measures soon.

Pressure on Beijing could grow on Monday, when Chinese GDP figures are released. Economists predict that growth slowed to 6.8% in the last quarter, down from 7% in Q2.

Asian markets hit two-month highs

Asia-Pacific stock markets have hit their highest level in two months, as traders in Tokyo, Shanghai and Melbourne anticipate that the era of ultra-low global interest rates isn’t over yet.

Japan’s Nikkei jumped 1%, on hopes that the US Federal Reserve isn’t going to end the party this month. Other stock markets in the region are also showing gains:

Asian stock markets, October 16 2015

Asian stock markets right now. Photograph: Thomson Reuters

The Agenda: Markets to rally on US Fed hopes

(FILES) This May 4, 2008 file photo shows the US Federal Reserve Building in Washington, DC. The Federal Reserve kept its benchmark federal funds interest rate unchanged at near zero percent as expected July 29, 2015, providing no fresh hints on when a long-awaited rate rise might come. The Federal Open Market Committee said the US economy has expanded “moderately” in recent months and the jobs market has strengthened, but noted continued “soft” business investment and exports. AFP PHOTO/Karen BLEIERKAREN BLEIER/AFP/Getty Images

The US Federal Reserve Building in Washington, DC. Photograph: Karen Bleier/AFP/Getty Images

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

Investors will be watching the US economy closely today, for signs that the world’s largest economy may be slowing. There are two pieces of economic data on the agenda:

  • US industrial production, at 2.15pm BST
  • The Michigan Consumer Confidence report, at 3pm BST

Economists reckon the figures might be weak, as Michael Hewson of CMC Markets explains:

Today’s US industrial and manufacturing production data for September are expected to reinforce the disappointing narrative with declines in both of -0.3% and -0.2% respectively, both of which would be negative for the second month in succession.

And negative economic data looks good for stocks right now….

…so shares in Europe are expected to rise, as traders bet that the US Federal Reserve could leave interest rates unchanged for the rest of the year.

As Hewson puts it, with the data so mixed….

…. is hard to see how policymakers can arrive at a consensus for what would be a momentous decision of being the first rise in US rates for 9 years. No-one will want to be remembered for getting a call of that magnitude wrong.

There’s also financial results from foodmaker Nestlé, French supermarket Carrefour, and UK retailer John Lewis (of which more shortly….).

Updated

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