Oil

So far, 2016 has seen some dramatic falls already, but Bank of Japan’s negative interest rates put some hope back into the global economy. The yen fell and markets reacted positively to the news of more support from a major central bank…

Powered by Guardian.co.ukThis article titled “Global markets end tumultuous month on a high” was written by Justin McCurry, Dominic Rushe and Katie Allen, for The Guardian on Friday 29th January 2016 20.24 UTC

Global markets have ended a difficult month on a stronger note after the Bank of Japan stepped in to boost its economy with negative interest rates.

However, weak economic growth figures in the US underscored the scale of a global slowdown that has rattled investors.

Policymakers at Japan’s central bank stunned markets with a narrow vote to impose a 0.1% fee on deposits left with the Bank of Japan (BoJ) – in effect a negative interest rate. The central bank was spurred into action as volatile markets, flagging global growth and a downturn in China threatened major economies around the world.

In the US, news that the economy barely grew in the final three months of 2015 prompted speculation that its central bank would rein in plans to raise interest rates this year, having tightened borrowing costs for the first time in almost a decade in December. GDP rose at an anaemic annual rate of 0.7% as consumers and businesses cut back on spending, while US exports were hurt by weaker overseas markets.

Rob Carnell, economist at ING Financial Markets, said: “All in all, these GDP data support the sense given by recent monthly numbers that the US economy lost momentum into the end of 2015. We are struggling to see how this story is reversed in the coming quarters.”

Stock market investors were cheered by the prospect of US interest rates rising at a slower pace and by the Japanese move, which followed the similarly aggressive precedent set by the European Central Bank (ECB) in June 2014. The negative rate is designed to encourage commercial banks to use excess reserves – which they normally keep with the central bank – to lend to businesses instead.

The radical intervention provided an immediate boost to stock markets around the world after a dramatic start to the year that saw trillions of dollars wiped off their value in a matter of days. On Friday, the FTSE 100 in London closed up 2.6% at 6,084, to be back within a whisker of its starting level for 2016 of 6,242. That rise was mirrored around European bourses and followed a rally in Asian stock markets, where Japan’s Nikkei jumped 2.8% to a two-week high. At the time of the London close, Wall Street was also higher, with the Dow Jones industrial average up 1.7%.

Chinese shares also rallied following the Japanese rate move but still suffered their biggest monthly fall for seven years. The Shanghai Composite Index has lost 22.6% since the start of the year.

The surprise negative rates decision came just days after the BoJ’s governor, Haruhiko Kuroda, suggested he had dismissed any drastic easing measures to boost business confidence.

On Friday, the bank said it had not ruled out a further cut. “The BoJ will cut the interest rate further into negative territory if judged as necessary,” it said in a statement.

It said the move was intended to lessen the risk to Japanese business confidence from turbulence in the global economy, a week after data showed the Chinese economy had grown at its slowest pace for a quarter of a century in 2015.

The ECB held back from injecting more electronic cash into markets at its meeting this month but it too fired up share prices with a promise to consider more action in March.

The prospect of central banks pumping more stimulus into a struggling global economy has also helped stabilise oil prices. Brent crude, which earlier in January hit a 13-year low below $28 a barrel, stood at about $33.86 on Friday. It is still down 30% from a year ago.

Highlighting global unease about the global outlook following China’s slowdown, gold prices have gained almost 5% in January.

Friday’s estimate of US GDP from the Commerce Department was less than half the 2% annual growth rate in the third quarter and was the weakest showing since a severe winter reduced growth to a 0.6% annual rate in the first quarter of 2015.

Economists cautioned that this early estimate could yet be revised but said it still pointed to global headwinds buffeting the world’s biggest economy and suggested the US Federal Reserve would not go ahead with all four interest rate rises slated for this year. Some said the latest signs of a US slowdown left the US central bank looking unwise after December’s rate rise.

“The GDP growth slowdown sheds a rather critical light on the Fed’s decision to raise interest rates in December,” said Nina Skero, economist at the Centre for Economics and Business Research.

“For the sake of credibility, it is unlikely that the Fed will reverse its December decision, but rates are likely to stay at their current level until 2017.”

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

Published via the Guardian News Feed plugin for WordPress.


USA 

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

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

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

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

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

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

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

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

US markets edge higher

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

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

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

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

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

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

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

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

Here’s the details:

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

Midday summary: Markets remain nervous

Time for a quick recap.

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

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

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

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

China remains a big worry today.

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

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

Chris Beauchamp of IG sums up the morning:

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

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

While Mike van Dulken of Accendo Markets warns:

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

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

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

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

Updated

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

Sainsbury’s reveals rejected takeover offer for Home Retail

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

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

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

dec05hffina
Home Retails’ share price today Photograph: Thomson Reuters

More here:

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

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

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

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

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

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

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

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

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

Brosens says:

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

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

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

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

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

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

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

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

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

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

Updated

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

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

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

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

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

Eurozone inflation weaker than expected

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

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

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

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

Eurostat says:

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

Eurozone inflation

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

Updated

UK building firms post stronger growth

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

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

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

jan05pminew

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

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

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

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

Updated

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

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

European stock markets

Invesotrs

German unemployment beats expectations

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

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

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

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

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

Updated

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

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

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

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

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

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

Updated

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

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

Shares in Next are out of fashion this morning.

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

Here’s some reaction:

Updated

Market open: European shares bounce back

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

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

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

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

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

Jasper Lawler, market analyst at CMC Markets, explains:

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

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

Next blames warm weather for weak Christmas

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

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

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

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

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

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

Next sales

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

Updated

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

IG is calling the main markets up around 1%:

Chinese authorities intervene to prop up markets

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

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

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

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

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

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

Updated

Introduction: Markets could stabilise after Monday’s rout

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

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

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

But unlike vanishing candyfloss, market value can reappear.

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

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

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

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

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

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

Published via the Guardian News Feed plugin for WordPress.

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

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

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

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

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

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

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

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

You can read our full story here.

Nuisance call firms

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

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

Here is a list of other fines imposed this year:

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

Updated

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

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

ABN Amro analyst Georgette Boele said:

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

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

Here is Connor Campbell again, financial analyst at Spreadex:

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

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

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

Campbell says:

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

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

Here is our story on Amazon.

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

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

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

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

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

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

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

You can read the full consumer confidence report here.

US confidence improves

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

Updated

Barclays Capital agrees $13.75m US settlement over mutual funds

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

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

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

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

You can read the statement in full here.

Updated

Wall Street opens higher

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

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

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

US house price inflation edges up

Homes for sale

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

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

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

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

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

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

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

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

US mortgage rates and the Fed funds rate

Competition watchdog to probe Sainsbury’s pharmacy sale

Tablets

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

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

The CMA says:

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

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

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

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

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

More pressure on Britain’s big supermarkets

Groceries

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

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

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

Here’s the full story:

Markets edge up, Wall St looks to open higher

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

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

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

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

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

Saudi stocks hit after oil plunge swells deficit

Aramco Oil Refinery in Saudi Arabia.

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

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

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

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

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

Saudi Arabia’s stock index:

Saudi Arabia's stock market

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

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

Time for a quiz?

A turkey sandwich with cranberry sauce.

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

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

We’ll keep it strictly business-related:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

New record for UK house prices

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

Its chief executive Paul Smith comments:

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

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

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

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

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

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

High street banks.

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

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

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

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

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

Fitness trackers

Fitness trackers Photograph: Katherine Anne Rose for the Observer

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

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

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

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

Markets update: Oil steadies, FTSE bobs around unchanged mark

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

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

Here’s how the FTSE looks for the year:

The FTSE 100 in 2015

The FTSE 100 in 2015 Photograph: Thomson Reuters

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

Brent crude in 2015:

Brent crude in 2015

Brent crude in 2015 Photograph: Thomson Reuters

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

Introduction: Floods impact, FTSE re-opens

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

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

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

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

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

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

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

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

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

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

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

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

Updated

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

Published via the Guardian News Feed plugin for WordPress.

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”.

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

Published via the Guardian News Feed plugin for WordPress.

Financial markets focused on the more downbeat indicators of construction and industrial production that some say might be a sign that the UK economy may be losing steam along with its largest trading partner the eurozone…

– >

Powered by Guardian.co.ukThis article titled “Official data points to loss of momentum in UK economy” was written by Katie Allen, for The Guardian on Friday 9th January 2015 16.30 UTC

Further evidence of a slowing British economy came on Friday as official figures showed a surprise drop in construction in November and falling industrial output as oil and gas output declined sharply.

But the data showed a bounceback in factory output that buoyed hopes for the manufacturing sector and good news on exports suggested UK companies could weather troubles in their biggest trading partner, the eurozone.

Financial markets focused on the more downbeat indicators, taking them as the latest evidence the economy lost steam in the final months of 2014. The pound lost ground against the dollar as traders bet the Bank of England would be in no hurry to raise interest rates from their record low, given the mixed signals on the economy.

“Disappointing official data are adding to survey evidence which indicate that the rate of UK economic growth slowed towards the end of last year,” said Chris Williamson, chief economist at data analysts Markit.

“Looking at all of the official statistics and survey evidence currently available, the data collectively point to the economy growing 0.5% in the fourth quarter, down from 0.7% in the third quarter,” he added.

While economists said it was too soon to say whether the slowdown at the end of the year continued into 2015, the latest figures will be unwelcome to the Conservatives as they seek to convince voters that the recovery remains on track.

“On balance, there is further evidence that UK growth is slowing as we head towards the general election,” said Simon Wells, chief UK economist at HSBC.

Among the bright spots for the economy in a clutch of reports from the Office for National Statistics was the news that manufacturing output rose by 0.7% in November, reversing October’s fall and beating economists’ expectations for growth of just 0.3%. On the year, output was up 2.7%.

But the wider industrial sector which also includes utilities, mining and oil and gas production, fell 0.1%. That drop was driven largely by a 5.5% fall in oil and gas output. The ONS said the weakness was partly down to maintenance work at two North Sea oil fields.

Respected thinktank the National Institute of Economic and Social Research said following the latest industrial production numbers it estimated growth slowed to 0.6% in the final three months of last year, after 0.7% in the three months to November 2014.

Separate official figures from the construction sector showed output fell by 2.0% on the month in November, defying economists’ forecasts for growth and contrasting with surveys of the sector.

The news on trade was more encouraging, however, as the ONS reported the narrowest trade deficit since June 2013.

The manufacturing sector is still not back to its pre-crisis strength and exports have not grown as fast as the government would have hoped. Progress has been slow in the government’s push to rebalance the economy away from overdependence on domestic demand, but some economists are predicting a strong 2015 for manufacturing.

A drop in oil prices to their lowest level in more than five years has buoyed hopes for the sector. Maeve Johnston at the thinktank Capital Economics cautioned it was far from certain oil prices will remain so low, but the fall should help “reinvigorate the recovery”.

“Indeed, if low oil prices are sustained, it should greatly reduce costs for the manufacturing sector, providing some welcome support over 2015. And sustained low oil prices would also ensure that the improvement in the trade deficit proves to be more than a flash in the pan,” she said.

The trade numbers beat expectations as the ONS reported the goods trade gap narrowed by £1bn to £8.8bn in November, as exports edged down but imports fell faster. Economists had forecast a £9.4bn gap. The less erratic figures for the three months to November showed exports grew by £2bn and imports shrank by £0.5bn.

The details showed exporters continued to benefit from targeting markets beyond the deflation-hit eurozone. Exports to countries outside the European Union increased by £2.1bn, or 6.0%, in the three months to November from the previous three months. Exports to the EU decreased by £0.1bn, or 0.3%. At the same time, the UK recorded its largest ever deficit with Germany, reflecting a decrease in exports and a slight increase in imports.

The trade gap for goods and services taken together fell to its lowest since June 2013, at £1.4bn in November.

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

Published via the Guardian News Feed plugin for WordPress.

IMF: Osborne should consider slowing fiscal plan. Full highlights of IMF’s latest World Economic Outlook. IMF concerned about the euro-area with Europe “languishing at bottom of three-speed economy.” Brent crude falls below $100 a barrel…

 


Powered by Guardian.co.ukThis article titled ” IMF cuts growth forecasts and urges George Osborne to rethink fiscal plans – as it happened” was written by Graeme Wearden, for theguardian.com on Tuesday 16th April 2013 16.08 UTC

5.33pm BST

Closing Summary

Time to wrap things up for the day here – but do check out the website tonight for more news from the IMF's meetings in Washington.

Here's a closing summary:

The International Monetary Fund has cut its forecasts for economic growth this year, in the latest warning that the world economy is struggling.

In its latest World Economic Outlook, the IMF lowered its world growth forecast to 3.3%, from 3.5%. It also expects a deeper recession in the eurozone (-0.3%, from -0.2%), and slightly less growth in the US this year (+1.9%, from 2.0%) (see 2.07pm onwards).

The IMF said the global outlook is slightly more positive than last autumn, but warned of a 'bumpy road ahead'.

The IMF lowered its forecast for UK growth this year to just 0.7%. It also urged chancellor George Osborne to consider changing the pace of his fiscal reform plans (see 2.01pm)

It pointed to the weakness of the economy, particularly the private sector, with chief economist Olivier Blanchard saying tonight that Osborne is 'playing with fire'. (see 5.06pm)

Fears over the global economy had already driven the oil price down, with a barrel of Brent crude costing less than 0 for the first time in nine months.

• German analysts and economists are also more worried about the situation. The monthly ZEW index posted a surprise fall this morning, with global trade and the Cyprus bailout blamed (see 10.11am).

The ZEW index helped to push shares down in Europe again today. The major indices all fell, with traders warning that the eurozone economy could be weaker than previously thought (see 4.53pm for closing prices).

Cyprus's president piled more pressure on the country's central bank governor. He attacked the Bank of Cyprus's conduct in a letter to ECB president Mario Draghi (see 3.59pm)

An opinion poll showed that Germany's new eurosceptic party has the support of around 3% of the country's voters – not enough to win seats in the Bundestag (see 11.17am).

The latest inflation data showed that the cost of living in the UK remained unchanged, at 2.8% (as measured by the CPI). Economists predicted that CPI will soon be back above 3%. (see 9.32am onwards).

In the eurozone, inflation fell slightly (see 10.02am) while in the US the cost of living actually dropped on a month-on-month basis (see 1.44pm).

I'll be back tomorrow – until then, thanks and goodnight!

5.08pm BST

The IMF's Olivier Blanchard has increased the pressure on George Osborne, telling Sky News this evening that the chancellor is 'playing with fire', and should considering changing his plans:

5.06pm BST

Shares rally on Wall Street

Shares have risen on Wall Street, with the Dow Jones industrial average and the S&P 500 both recovering some of yesterday's losses. Both indices had fallen in late trading on Monday, following the news of the fatal Boston Marathon bombing.

Dow Jones: up 128 points at 14,727, + 0.88%

S&P 500: up 15 points at 1,567, +0.98%

Traders held a moment of silence for the victims of yesterday's attack and their families, before the session started.

Traders observe a moment of silence to honor the victims and families of the Boston Marathon bombings, before the opening bell on the floor of the New York Stock Exchange, April 16, 2013.
Photograph: BRENDAN MCDERMID/REUTERS

4.53pm BST

Markets close in the red

Stock markets in Europe have closed for the day, with the major indices posting small losses.

The gold price hasn't managed much of a recovery today, currently up 1.1% at ,376 per ounce (having tumbled 9% on Monday).

And the oil price remains under pressure, with a barrel of Brent crude trading at .98, having dropped below 0 for the first time in 9 months this morning.

Here's the closing prices:

FTSE 100: down 39 points at 6304, -0.6%

German DAX: down 21 points at 7,690, -0.28%

French CAC: down 17 points at 3692, – 0.48%

Italian FTSE MIB: down 96 points at 15,533, -0.6%

Spanish IBEX: down 65 points at 7,948, -0.8%

This morning's drop in German economic confidence (see 10.11am) has helped to push shares down. Jennifer McKeown of Capital Economics said the ZEW index had fuelled concern that Germany's recovery is faltering.

While we still see Germany easily outperforming the rest of the euro-zone this year, we think that a strong and sustained recovery is too much to hope for. We maintain our forecast for the economy to stagnate this year and grow by just 0.5% in 2014.

4.31pm BST

Key event

The International Monetary Fund's warning to the UK over the pace of its fiscal adjustment (see 2.01pm) has triggered a political clash between the UK government and the Labour opposition.

The Treasury first. It downplayed the IMF's concern, pointing out that Britain's growth forecasts for this year are better than Europe's two biggest economies.

A spokesman said:

Today’s report from the IMF highlights the risks that continue to face economies around the world. Though the UK is forecast to have stronger growth than either France or Germany in 2013, difficulties in the euro area are still creating economic headwinds.

However, as the Chancellor said at the Budget, we are slowly but surely fixing this country’s economic problems. The deficit is down by a third, a million and a quarter new private sector jobs have been created and because of the credibility the Government has earned, families and businesses are benefitting from near-record low interest rates.

Thus sidestepping the IMF's call for the government to consider a change….

…to the chagrin of Ed Balls, shadow chancellor. Balls responded thus:

It was a serious mistake for George Osborne to totally ignore the IMF’s calls for a reassessment of fiscal policy in the Budget. They are right to step up their warnings and insist that a change of economic policy is considered right now.

“Our economy has flatlined for two and a half years, real wages are falling month by month and the result is £245 billion more borrowing than planned to pay for this economic failure. How much more damage needs to be done before the Chancellor finally acts?

Balls pointed out that the IMF had predicted growth of 2% for 2013 a year ago – but now expects GDP to expand by just 7%.

These downgraded growth forecasts are yet another damaging blow to a downgraded Chancellor whose economic policies have totally failed.

3.59pm BST

Cyprus president blasts central bank’s handling of the crisis

Governor of the Cypriot Central Bank, Panicos Demetriades speaks to media representatives after a meeting with Cypriot President Nicos Anastasiades, in front of presidential palace, Nicosia, Cyprus, 21 March 2013.
Governor of the Cypriot Central Bank, Panicos Demetriades, last month. Photograph: KATIA CHRISTODOULOU/EPA

Back in the eurozone… the battle over the future of Cyprus's central bank governor has taken another twist.

The president of Cyprus, Nicos Anastasiades, has written to Mario Draghi, telling the ECB president that the country's central bank failed to perform its duties in the run-up to the crisis.

The letter is a rebuttal to Draghi's warning last week that national central bank governors cannot be sacked unless they are "guilty of serious misconduct" or can no longer perform their duties.

Reuters has the details of the letter, apparently sent yesterday:

The governor of Cyprus's central bank failed to regulate its now-crippled banking system effectively, the island's president Nicos Anastasiades said in a letter to ECB chief Mario Draghi.

Deepening a row between the government and central bank, Anastasiades attacked Panicos Demetriades, who was appointed as governor last year, for what he said was sustaining an insolvent bank using a European Central Bank cash lifeline.

The president also said there were damaging delays in resolving problems in the banking sector, after depositors were slapped with massive losses to fund a state bailout last month.

In an April 15 letter to ECB President Draghi, a copy of which was seen by Reuters, Anastasiades speaks of "shortcomings of the Central Bank of Cyprus".

Speaking of Draghi, his appearance at the European Parliament didn't bring MEPs flocking:

2.59pm BST

MAP: Growth forecasts for 2013

Map of IMF growth forecasts
Photograph: IMF

This map, from the World Economic Outlook, shows which parts of the world economy should expand strongly this year (dark blue), which should manage solid growth (light blue), which will grow slower (yellow) or struggle (orange), and which will actually contract (red).

You can see why the IMF remains so concerned about Europe.

Updated at 3.34pm BST

2.53pm BST

Duncan Weldon, the TUC's senior policy officer, points out that the IMF's new forecasts for the UK are actually slightly more upbeat than official predictions for 2013, but more pessimistic for 2014:

Updated at 2.56pm BST

2.48pm BST

Larry Elliott: Europe languishing in three-speed global economy

Economics editor Larry Elliott has also analysed the report, and confirms that Europe's woes continue to alarm the IMF:

He writes:

Prolonged stagnation in the eurozone – GDP falls by 0.3% this year after a 0.6% drop in 2012 – is worrying in itself but it also has knock-on consequences for the rest of what the Fund sees as a three-speed global economy. In the first division are the emerging economies, which are exploiting their ability to catch-up with the countries of the developed world. They should see growth of more than 5% this year, similar to last year's performance.

The second division includes the US, Canada and Japan – even though the IMF clearly believes the stop-at-nothing reflationary strategy adopted by the new government in Tokyo is "risky" given the high level of public debt and the absence of a credible plan for putting the public finances back into some sort of order.

Finally, there is Europe, firmly in division three and with no immediate prospect of promotion.

Full analysis here: Eurozone crisis clouds IMF's improving outlook

2.48pm BST

Our full story about the IMF's warning to the UK is online here:

George Osborne should ease off on austerity, IMF warns

2.43pm BST

IMF to hold discussions with UK

Chancellor of the Exchequer George Osborne.
Chancellor of the Exchequer George Osborne. Photograph: Barbara Lindberg/Rex Features

The IMF will hold talks with the UK government over how the fiscal adjustment programme could be slowed.

From Washington, economics editor Larry Elliott reports:

Blanchard just singled out the UK as acountry that needs to show more flexibility on austerity.

"In the face of very weak private demand it is time to consider adjustment to the original fiscal plans," Blanchard said.

Blanchard added that the IMF will hold discussions with the UK over the coming months to "see what can be done" about pace of deficit reduction.

The IMF conducts an annual health check on the UK, which gives it a forum to raise its concerns.

Previously, the IMF has backed George Osborne's strategy while cautioning that a rethink might be needed if the economic situation worsened. With UK GDP shrinking again in the last three months of 2012, that moment has apparently arrived.

2.38pm BST

Back to the IMF briefing in Washington: chief economist Olivier Blanchard has told reporters that the risk that the eurozone might not stick together has "disappeared" due to measures from the European Central Bank and the European Union.

However, there is "a further urgent need to strengthen banks without weakening sovereigns", he added.

2.32pm BST

In other news, Mario Draghi is testifying at the European Parliament now. The president of the European Central Bank is telling MEPs that it is vital to deliver closer economic and monetary union. Live stream here.

2.28pm BST

IMF: Bumpy road ahead

The top-line message from the International Monetary Fund is that the world economy has improved since last October, but there's still plenty of problems.

As it puts it:

Global prospects have improved again but the road to recovery in the advanced economies will remain bumpy.

The IMF is relieved that policymakers in 'advanced economies' have successfully "defused" the threat of a breakup of the euro area and a sharp US fiscal contraction cut to the “fiscal cliff".

But, it warns that "old dangers remain and new risks have come to the fore.". And the eurozone continues to be top of the list:

In the short term, risks mainly relate to developments in the euro area, including uncertainty about the fallout from events in Cyprus and politics in Italy as well as vulnerabilities in the periphery.

2.22pm BST

You can download the IMF World Economic Outlook from its website:

Chapter 1: Global Prospects and Policies

Chapter 2: Country and Regional Perspectives

2.17pm BST

Click here to see an overview of the IMF's projections:

Summary of IMF forecasts in the World Economic Outlook, April 2013
Photograph: /IMF

2.16pm BST

Other key points from the IMF. It also expects France to shrink by 0.1% this year, Italy to contract by 1.5% and Spain to shrink by 1.6%.

And as expected (following last Friday's leak), it has cut its forecast for US growth this year to 1.9% (from 2%).

Updated at 3.31pm BST

2.13pm BST

Olivier Blanchard, chief economist at the International Monetary Fund
Olivier Blanchard, chief economist at the International Monetary Fund, presenting today’s report.

2.10pm BST

Watch the IMF press conference

The IMF is presenting its new World Economic Outlook at a press conference in Washington – you can see it live here:

2.07pm BST

IMF warns of deeper eurozone recession

The IMF has taken the red pen to most of its economic forecasts, admitting that the global recovery is weaker than expected.

It has cut its forecast for global growth to 3.3%, from 3.5% in the previous World Economic Outlook.

And it now expects the eurozone to shrink by 0.3% this year, worse than the 0.2% contraction expected before.

2.01pm BST

IMF cuts UK growth forecasts and urges austerity rethink

Breaking: The International Monetary Fund has cut its growth forecasts for the UK and urged George Osborne to reconsider the pace of his austerity programme.

The warning comes in the IMF's new World Economic Outlook figures, just released.

From Washington, our economics editor Larry Elliott reports:

George Osborne has been told by the International Monetary Fund to re-think the pace of his deficit reduction plan after the Washington based institution cut its forecast for UK growth in both 2013 and 2014.

The IMF’s flagship publication – the half-yearly World Economic Outlook – provided fresh ammunition for the chancellor’s Labour critics when it said the Treasury should contemplate being flexible about its austerity strategy.

In its latest forecasts, the Fund said gross domestic product in the UK would rise by 0.7% this year and by 1.5% in 2014 – in both cases a cut of 0.3 points from its last set of predictions in January.

The warning comes a week before the latest GDP data shows if Britain is in a triple-dip recession.

The IMF warned that the UK recovery was progressing slowly. Here's the key statement on the UK, explaining why Osborne should consider changing course.

Domestic rebalancing from the public to the private sector is being held back by deleveraging, tight credit conditions and economic uncertainty, while declining productivity growth and high unit labour costs are holding back much needed external rebalancing.

…In the UK, where recovery is weak owing to lacklustre demand, consideration should be given to greater near-term flexibility in the fiscal adjustment path.

The IMF is presenting the full World Economic Outlook in Washington now….

1.48pm BST

The number of new housing starts in the US has jumped to the highest level since June 2008 (three months before Lehman Brothers Failed).

The number of housing plots where work actually began jumped by 7% in March to 1.036 million, suggesting the housing recovery is strengthening.

1.44pm BST

US inflation data shows falling prices in March

The cost of living actually fell last month in America, according to the latest inflation data just released.

On a month-on-month basis, the consumer prices index was down by 0.2% in March vs February – mainly due to falling gasoline prices.

Inflation was also lower than expected on an annual basis, with CPI up by 1.5% compared with March 2012.

For comparison, eurozone CPI came in at 1.7% this morning (here) while in the UK it remained at 2.8% (from here).

1.27pm BST

MEPs approve bank bonus curbs

The European Parliament has given its approval to new rules for the banking sector, which include restrictions on bonuses – pegging them at 100% of annual salary.

AP has the story:

The European Parliament on Tuesday voted in favor of financial reforms, including a new law to cap bankers' bonuses.

The rule limits bonus payments at one year's base salary, or double that if a large majority of a bank's shareholders agrees. It will come into force next year and will also apply to European units of foreign banks and the employees of EU banks working overseas in New York, for example.

Lawmakers in Strasbourg overwhelmingly backed the proposed law and passed a sweeping package of financial laws that will force banks in the 27-nation European Union to strengthen their capital buffers.

"We are making our banks more resilient to crises with today's decision so that they no longer have to be bailed out with taxpayers' money," said Othmar Karas, a leading conservative lawmaker who oversaw the legislation.

The new reforms detailed in a 1,000-page document also lay important groundwork for the creation of a centralized banking supervisor for the eurozone, a cornerstone of the 17-country currency bloc's effort to tackle its debt crisis.

The package of financial reforms which implement the internationally agreed Basel III rules were hammered out earlier this year after months of arduous negotiations between EU governments, the EU Commission and parliament. They now have to be implemented in national law by next year.

Karas called the set of rules the "most comprehensive and far-reaching banking regulation in the EU's history."

The different legislative packages were adopted by about 600 European lawmakers, with about 40 or less voting against them.

EC president Jose Manuel Barroso and Commissioner Michel Barnier have just issued a statement welcoming the move. Here's a flavour:

These new rules will strengthen the internal governance of banks.

Remuneration policies will have to be aligned with sound and effective risk management. Shareholders are given a special responsibility and an appropriate and reasonable maximum ratio is introduced between the fixed salary and the bonus for all risk takers.

Critics of the plan, though, claim it will drive up basic salaries and make bankers less accountable for performance….

12.45pm BST

Goldman Sachs beats expectations

Meanwhile on Wall Street, Goldman Sachs has just smashed analyst expectations with its results for the first three months of 2013.

Goldman posted earnings per share of .29, against expectations of .88. And net revenues from investment banking were 36% higher than a year ago.

CEO Lloyd Blankfein said Goldman was 'pleased' with its performance, but claimed the firm isn't immune to the wider economic ills. He warned shareholders:

The potential for macro-economic instability was felt in the quarter and constrained overall corporate and investor activity.

Still, it's a sharp contrast with the gloom in much of Europe.

12.32pm BST

Just 90 minutes until the International Monetary Fund releases its latest World Economic Outlook, and anticipation is building…

11.43am BST

Economist Nouriel Roubini has warned that today's drop in optimism among German economists and analysts confirms that the eurozone 'malaise' has reached Germany:

11.40am BST

Market update

Looking back at the markets, and Brent crude oil remains below the 0 mark.

As this graph shows, the oil price has been on a downward path since early February, before recent disappointing economic data provided the latest push:

Brent crude oil price
Brent crude oil, in 2013. Photograph: Reuters

Europe's major indices are still in the red, with the DAX falling further after the ZEW index showed that economic optimism has fallen in Germany (see 10.11am)

FTSE 100: down 33 points at 6310, -0.5%

German DAX: down 42 points at 7669, -0.5%

French CAC: down 22 points at 3687, -0.6%

Spanish IBEX: down 31 points at 7982, -0.4%

Italian FTSE MIB: down 28 points at 15,600, -0.18%

The sell-off in London would be sharper, but for a rumour that the drawn-out merger of Xstrata and Glencore has been approved by China. Their shares are up over 5% each – but most of the market is down (79 shares have fallen, versus 21 risers):

FTSE 100, April 16 2013
Plenty of red ink on the FTSE 100 today.

11.17am BST

Germany’s new anti-euro party has 3% support

Germany's new eurosceptic political party has the support of 3% of the population, according to a poll released by the tabloid Bild today.

It's the first survey since Alternative für Deutschland (AfD) held its founding conference on Sunday. AfD fervently opposes eurozone bailouts, and will campaign in this autumn's election for the "orderly dissolution of the euro".

That leaves AfD some way adrift of the 5% threshold to claim seats in the Bundestag – but there's still several months until the elections. The poll also confirms that Angela Merkel's CDU party holds a solid lead over the main opposition group, the SPD:

German opinion poll, 16 April 2013
Photograph: Bild

AfD has been criticised by several German politicians since its launch – and Bild itself (no fan of eurozone bailouts) points out that a return to the Deutsche mark would make German exports much pricier.

Guy Verhofstadt, the former Belgian prime minister who leads the Alliance of Liberals and Democrats for Europe in the European parliament, took to Twitter to blast the party today. He called AfD "suicide for Germany" and a "nightmare" for the rest of Europe….

Rather than loosening Europe's ties, Verhofstaft's solution is closer fiscal integration:

11.00am BST

Greek ferry workers hold 24-hour walkout

A man walks past moored ships at the port of Piraeus, Greece, 16 April 2013. A 24-hour strike was called by all Greek seamen unions against the vote of a bill undermining their collective bargaining rights and to protest austerity measures on 16 April.
A man walks past moored ships at the port of Piraeus, Greece, this morning

A 24-hour strike has been called by all Greek seamen unions today, in protest at the country's austerity programme and a bill that will undermine workers' collective bargaining rights.

The walkout, which ends early on Wednesday morning, has left Greek islands without ferry links with the mainland, AP reports.

Living In Greece had more details:

• There is usually a last sailing from the islands as many vessels must return to slips in Athens.
• Routes between Greece and Italy are unaffected if the crew is Italian and ports are not blockaded.

Some suburban railway employees are also planning to hold four-hour stoppages between 8pm and midnight today, and on Wednesday and Thursday (more here).

Updated at 11.00am BST

10.11am BST

German economic sentiment takes a dive

Germany's ZEW index of economic sentiment has fallen sharply, as fears over the eurozone crisis loom over its largest economy.

The ZEW economic sentiment index slipped to just 36.8, down from March's 48.5 (and much worse than expectations) – a sign that optimism is faltering among the economists and analysts surveyed by ZEW.

The think tank cited recent disappointing economic data, and the ongoing eurozone crisis.

Updated at 10.15am BST

10.02am BST

Eurozone inflation

Eurozone inflation data is just in – CPI rose by 1.7% year-on-year in March, that's down on February's 1.8%.

That may give the European Central Bank more opportunity to cut interest rates…..

9.59am BST

Inflation: what the economists say

City economists are warning that UK inflation will head higher this year. Here's a round-up of early reaction, from Reuters:

GEORGE BUCKLEY, DEUTSCHE BANK

I do think you are going to see some increases in inflation over the course of the next three or four months. I wouldn't be surprised to see inflation heading above 3 percent. The one uncertain factor is here is how much petrol prices fall over the next few months based on the fact that we've seen lower oil prices and that could actually limit the peak in inflation we originally had at 3.4% or 3.5%….

ROB WOOD, BERENBERG BANK

The trend for inflation is probably up, heading to 3% pretty soon.
The Bank of England seems unlikely to engage in more asset purchases in the next month or two, with inflation threatening to go into letter-writing territory soon."

PHILIP SHAW, INVESTEC

This is about as close to consensus as you're likely to get. Our view remains that CPI will move above 3% in the coming months.

The big question is whether the MPC will look through this and become more aggressive on QE. We suspect it will.

9.54am BST

Wages failing to keep pace with inflation:

At 2.8%, the cost of living in the UK continues to outpace the rise in wages, as economist Shaun Richards points out:

And it appears it's partly our fault:

Not free websites, of course :)

9.48am BST

UK inflation: the details

While the consumer prices index rose by 2.8% year-on-year, prices were up by 0.3% during March itself.
Here's a chart that breaks down today's inflation data, showing how prices rose/fell last month compared to February, and compared to March 2012.

UK CPI inflation, March 2013
Photograph: /ONS/Reuters

The retail prices index (which includes housing costs) came in at 3.3%, or up 0.4% during March.

9.32am BST

UK inflation stays steady

UK inflation rose by 2.8% year-on-year in March, as measured by the Consumer Prices Index (the Office for National Statistics just reported).

That's a repeat of February's reading, and in line with expectations.

Clothing and footwear showed the largest month-on-month increase, while food and alcoholic beverage prices were down compared with February.

Table to follow…

Updated at 9.33am BST

9.05am BST

We'll also be watching the European Parliament this afternoon, where Mario Draghi is scheduled to make an appearance (at 2pm BST, RanSquawk flags up).

9.02am BST

The agenda

The biggest event on the agenda today is the International Monetary Fund's latest forecasts for the world economy.

We also have inflation data for the UK, the eurozone, and the US, as well as the ZEW measure of German investor confidence.

Some of the data from the IMF leaked last Friday, suggesting it will cut its prediction for US growth (see here), but there should be plenty of other interesting news to cover.

UK inflation data for March: 9.30am BST

Eurozone inflation data for March: 10am BST

German ZEW index of investor confidence: 10am BST

US inflation data: 1.30pm BST (8.30am EST)

IMF's latest World Economic Outlook: 2pm BST

8.39am BST

Shares down again

Europe's stock markets are in the red this morning,.

FTSE 100: down 24 points at 6318, – 0.3%

German DAX: down 12 points at 7700, – 0.16%

French CAC: down 3 points at 3706. -0.1%

Spanish IBEX: down 50 points at 1,963, – 0.6%

Italian FTSE MIB: down 54 points at 15,574. -0.35%

Rebecca O'Keeffe, head of investment at Interactive Investor, blamed fears over the state of the US and Chinese economies. She also fears more losses ahead – partly because of the eurozone crisis

With China disappointing and recent weak data from the US raising serious questions about whether the tax increases and spending cuts suggest a more significant impact on US growth, there seems little to entice investors.

And with continuing problems in Europe and the seemingly ever expanding black hole that represents the financial position of Cyprus, investors may be well advised to be more cautious over the coming weeks.

8.29am BST

An alternative view on gold….

Updated at 8.45am BST

8.25am BST

Gold price up, but close to two-year low

Gold has staggered back off the mat this morning, up around 1.3% at ,378 per ounce.

A crumb of comfort for gold bugs, whose morale and wallets are badly bruised by Monday's slump (gold was trading around ,560 last Thursday).

But few City analysts this morning are predicting a swift recovery. Katie Martin of Dow Jones sums up the latest reaction:

Updated at 8.48am BST

8.09am BST

Moody’s cuts China’s outlook

Rating agency Moody's has dented China's hopes of a credit rating upgrade this morning, by cutting the outlook to 'stable' from 'positive'.

In the latest sign of concern over China, Moody's warned that it had not made much progress in addressing potential bad debts held by its local government bodies.

It explained:

Progress has been less than anticipated in the process of both reducing latent risks by making local government contingent liabilities more transparent and in reining in rapid credit growth; therefore, some of the upward pressure on the Aa3 rating has eased.

Aa3 is the fourth highest rating on the Moody's scale. More here.

Updated at 8.10am BST

7.54am BST

Brent crude hits nine-month low as global fears grow

Good morning, and welcome to our rolling coverage of the latest developments in the eurozone crisis and the global economy.

Concern over the state of the global economy is growing today, as the jitters that hit the markets yesterday continue to reverberate around the trading floors. 

Brent crude oil has fallen below the 0 a barrel mark overnight, its lowest levels since July 2012. Monday's disappointing growth figures from China are being blamed – with investors anticipating lower demand for oil if (as feared) the global economy is entering a stickier patch.

The message this morning is that economic growth may be more elusive than expected (despite the ultra-loose monetary policy we've been showered with since the crisis began).

As Myrto Sokou, senior analyst at the Sucden brokerage, explained to AFP:

The recent Chinese economic data failed to meet analysts’ expectations and added further pressure to the market that was already showing sharp losses following disappointing US economic data last week.

And Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, warned that:

There is a level of confidence evaporating from the [oil] market.

Of course, lower oil prices could actually help Europe's struggling economies – lowering inflationary pressures and cutting transport costs.

But the broader picture remains that the economic picture does not look too great – Monday's Empire State Manufacturing Index, which measures the health of the US manufacturing sector, was also a disappointment.

Michael Hewson, senior market analyst at CMC Markets, warns that shares and commodities are likely to keep falling today:

Yesterday’s China inspired sell off looks set to continue this morning in the wake of continued sharp falls in oil, gold and copper prices as investors appear to be starting to lose patience and confidence in the so called global recovery story.

Another disappointing US economic indicator by way of the Empire manufacturing survey did nothing to quell these concerns as the run of disappointing US economic data continued.

 Despite billions of dollars of financial stimulus from central banks worldwide the global growth story still appears to be no closer to showing signs of moving into a higher gear, and if anything continues to misfire like a clapped out old motor vehicle.

And to complete the picture, Moody's has lowered its outlook on China from positive to stable (more on this shortly).

So, that's the cheery picture this morning – I'll be tracking all the economic news and developments in the euro crisis through the day …

Updated at 8.53am BST

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

Published via the Guardian News Feed plugin for WordPress.

Gold hits levels last seen in April 2011. 3.5% fall to $1,410 following 5.8% fall on Friday. China GDP at 7.7% versus 8% expectations. Industrial production 8.9% against expected 10.1%. Brent crude hits nine-month low. US housing data disappoints…

 


Powered by Guardian.co.ukThis article titled “Eurozone crisis as it happened: Gold slumps to a two-year low as China data disappoints” was written by Simon Neville and Nick Fletcher, for theguardian.com on Monday 15th April 2013 13.34 UTC

5.27pm BST

European markets fall as gold tumbles

With gold on the slide again – thanks to disappointing Chinese growth and fears of countries flooding the market by selling their reserves to boost their finances – stock markets were also under pressure. Michael Hewson, senior market analyst at CMC Markets UK, said:

Anyone hoping for a quiet start to the week in the lead up to this week’s G20 and IMF meetings got a rude awakening as European markets dropped sharply on the open in the wake of disappointing Chinese economic data which showed that economic growth for the first quarter only came in at 7.7%, well below expectations of a rise to 8%.

Mining stocks and commodity prices have got absolutely battered with gold prices falling though a key technical support level and silver prices also doing the same thing.

But by the close, many European markets had come off their worst levels:

• The FTSE 100 finished down 40.79 points at 6343.60, a 0.64% fall

• Germany's Dax dropped 0.41%

• France's Cac closed 0.5% lower

• Italy's FTSE MIB lost 0.96%

• Spain's Ibex fell 0.33%

• The Athens market dipped 0.11%

And with downbeat US manufacturing and housing data, the Dow Jones Industrial Average is currently down around 120 points.

On that note, it's time to close up for the evening. Thanks for your comments and we'll be back tomorrow.

5.23pm BST

Recently appointed Cypriot finance minister Haris Georgiades insists there is no anti-EU feeling in the country despite criticisms of the bailout terms.

In an interview with the Financial Times he said there was frustration at the remedy offered, but also a realisation that the problems were self-inflicted rather than coming from outsiders.

Cyprus's finance minister Haris Georgiades.  Photograph:  AFP/Getty Images/Yiannis Kourtoglou
Cyprus’s finance minister Haris Georgiades. Photograph: AFP/Getty Images/Yiannis Kourtoglou

Updated at 5.24pm BST

3.38pm BST

Portugal’s banks unlikely to need more capital says banking head

Portuguese banks may not need extra capital despite what a leading ratings agency suggested, according to the head of the country's Banking Association.

Moody's warned last week the country's banks might need an extra €8bn as non-performing loans had risen more than expected.

But Fernando Faria de Oliveira told Reuters that "nothing points to those figures" and at the moment there was no need for more capital. He said:

I respect Moody's but I don't believe we will need to raise such [an] amount of capital at all. We are confident about the solidity of Portuguese banks.

3.26pm BST

US housing data disappoints

The latest US data has added to the gloom engendered by disappointing Chinese growth figures and the continuing pressure on the gold price.

Following worst than expected New York manufacturing figures comes a downbeat US housing survey. The National Association of Home Builders/Wells Fargo index fell to 42 in April from 44 in March, the third dip in a row. Analysts had been expecting a small rise to 45. Builders reported increasing costs of materials and worries about the supply chain.

With that, the Dow Jones Industrial Average has added to opening losses and is now down nearly 100 points or around 0.7%.

3.15pm BST

More from Draghi:

3.09pm BST

There is not much new in Draghi's comments, according to Annalisa Piazza at Newedge Strategy:

In a nutshell, Draghi hasn't added much to what suggested in early April. The ECB is widely aware with problems with SMEs but it looks like it has no "magic wand" to solve the lack of transmission. Comments by Draghi suggest that some step in the direction of repairing SMEs lack of competitiveness have been made but it's not just the ECB policy that can work its way through the economy.

ECB president Mario Draghi addresses students at the University of Amsterdam. Photograph: AP/Peter Dejong
ECB president Mario Draghi addresses students at the University of Amsterdam. Photograph: AP/Peter Dejong

2.34pm BST

ECB Draghi speech in full

The European Central Bank has published a full copy of President Mario Draghi's speech. After a whimsical journey through Amsterdam's history and the crisis of 1763, he gave a stark warning:

In providing liquidity to our banking counterparties, we cannot and do not want to subsidise banks that are failing. Our liquidity support is not and should not be equity support. Likewise, in pricing out break-up risk in sovereign debt securities, we cannot and do not want to subsidise governments.

He added:

Unlike economies with a single fiscal authority or with a fully-fledged federal structure, the euro area comprises multiple sovereign states. The debt of each of these states has different liquidity and risk characteristics. In such a set-up there is no uncontroversial way to define the term structure of the risk-free rate. As a matter of fact, this means that there is no univocal measure of the term premium for the euro area as a whole.

The banking sector and the financial market of the euro area has become fragmented. This is harmful as the euro area is a bank-based economy. Around three quarters of firms’ financing comes from banks. So if banks in some countries will not lend at reasonable interest rates, the consequences for the euro area economy are severe.

And with that, I'm handing over to my colleague Nick Fletcher.

Updated at 3.10pm BST

2.23pm BST

More from Draghi's Amsterdam speech.

He says financial sector fragmentation in the eurozone has been receding but problems in the euro area's economic landscape still "loom large".

Mario Draghi met De Nederlandsche Bank President Klaas Knot (2nd L), Dutch PM Mark Rutte (centre L) and Eurogroup President Jeroen Dijsselbloem (2nd R) in The Hague today. Photograph: REUTERS
Mario Draghi met De Nederlandsche Bank President Klaas Knot (2nd L), Dutch PM Mark Rutte (centre L) and Eurogroup President Jeroen Dijsselbloem (2nd R) in The Hague today. Photograph: REUTERS

2.16pm BST

Draghi speech in Amsterdam – failing banks should not be supported

Over at the University of Amsterdam, ECB president, Mario Draghi, is giving a speech.

He said:

We do not want to support banks that are failing

Suggesting he has moved away from his position of unlimited funding to bolster struggling markets.

Here are tweets coming from the room

1.57pm BST

EU officials to give upbeat assessment to G20

EU officials are expected to tell the G20 finance ministers in Washington this week:

The euro area has made further progress in the implementation of its comprehensive crisis-response strategy.

With a

mild recovery setting in toward mid-2013 and strengthening in the second half of 2013 and in 2014.

That's according to Bloomberg who have seen a draft statement left over from a similar meeting in Dublin last Friday.

1.37pm BST

New York manufacturing data released

The pace of growth in manufacturing in New York state – an early indicator for the rest of the country – slowed more than expected.

The New York Federal Reserve's "Empire State" general business conditions index fell to 3.05, from 9.24 in Larch, short of forecasts of 7.

New orders dropped to 2.2 from 8.18, inventories improved to -4.55 from -5.68.

11.37am BST

Wealth tax to pay for EU bailouts?

The Telegraph has reported comments from Professor Peter Bofinger, an adviser to Angela Merkel, that he made in Der Spiegel.

In it, he suggests the rich in struggling eurozone countries, such as Spain and Italy, should face new property taxes instead of any future raids on depositors savings, as in Cyprus.

He told the German magazine:

The resourceful rich just move their money to banks in northern Europe and avoid paying.

Instead of taxing cash, European Union governments should in future target property and other, less mobile assets, he said.

For example, over the next 10 years, the rich should give up a portion of their assets.

The argument goes that the taxes should be used to fund future bailouts rather than relying on cash injections from the Troika. However, Merkel has yet to endorse the ideas put forward by Bofinger.

11.18am BST

10.54am BST

Eurozone trade surplus boost

The eurozone's trade surplus grew in February, but the positive balance was helped by lower demand for imports rather than export growth.

The trade surplus with €10.4bn in February, unadjusted, beating expectations of €3bn, and up from a €1.3bn surplus in February last year.

Eurozone exports were down 1.1% year-on-year in February, while imports were down by 7.1% year-on-year.
 
Seasonally-adjusted data show the trade surplus improved to €12bn in February, after dipping to €8.7bn in January from €10bn in December.

Howard Archer at IHS Global Insight said:

The eurozone is likely to have needed all the help it could get from net trade in the first quarter of 2013 as it looks highly likely that domestic demand contracted overall.
The eurozone will be fervently hoping that global growth improves as 2013 proceeds, thereby boosting exports and facilitating the single currency area’s exit from recession.

10.26am BST

Greek heart attacks increase

A new major study in Greece has found that heart attacks have increased during the economic crisis, giving an insight into the effects beyond monetary ones.

Open Democracy, which reports the findings, said heart attacks increased 29% after the crisis hit, compared with before, with women suffering hardest hit – up 39%. The researchers point out the unemployment rate for women is higher than men

Dr Emannouil Makaris, presenting his findings at a research talk at the American College of Cardiology’s annual meeting, said

Greek women have a higher unemployment rate than men, they are responsible for child care, and they also work outside the home – a formula for stress.

Unemployment is a stressful event and stress is connected with heart disease, but other issues also come with financial difficulties. In these times a lot of people do not have money to buy medications or go to their primary care doctor. The cost to society is high.

10.14am BST

Silver getting hit

10.11am BST

Sticking with gold, Pawelmorski has written an excellent blog post on the precious metal.

Here's an extract:

Gold – unlike bank deposits, equity or bonds, or even banknotes – it’s separate from the real economy; it’s what you invest in when you want to take a breather from what’s happening in the real economy. That’s actually only a sensible thing to do in pretty extreme circumstances. Gold returns are utterly crushed by equity markets in the long term – to a really astonishing degree for those economies where we have continuous equity markets. Compared with shares in pre-revolutionary China or pre-war Poland, gold returns look pretty good. Gold is less an index of how confident we are that our leaders a) want to b) know how to do the right thing as it is an index of how sure we are that they won’t completely and utterly screw the pooch.

So what can go wrong?

I’m sick of hearing about hyperinflation. The case for gold often starts off with a chart of narrow money or the Central Bank balance sheet, and skips over the (dead-in-the-water) dynamics of broad money. Economists like to use the parable of “helicopter money” (banknotes thrown from a helicopter), and sadly some people appear to be scanning the skies for scrip-dispensing helicopters. What’s actually happened is that the helicopter pilot suffered some nasty losses on US subprime debt and Greek Government bonds and is hoarding the new money, so it’s not having a lot of inflationary impact.

If inflation is always and everywhere a monetary phenomenon, hyperinflation is a political one. Without the political conditions – usually an-even-more-than-normally unpopular and illegitimate government – usually the harder choices do in fact get taken. Argentina and Russia (and Jamaica for that matter) defaulted on debt in local currency debt that they could print rather than face hyperinflationary consequences. Argentina and Iceland both imposed capital controls for similar reasons.

10.04am BST

10.01am BST

Gold reaction

So what has caused gold to fall 3% today, after a 5.3% fall on Friday?

Hitting a two-year low, gold, along with other commodities, have slumped.

Usually gold is invested in to hedge against inflation. Some bearish analysts have warning the past that it would be a good bet because of the fears of hyperinflation.

However, these haven't panned out.

Michael van Dulken at Accendo Markets said:

Gold took another leg down from its Friday weakness, although off its worst levels of 25 (2-year lows). Having decisively broken 18-month lows of 20 on Friday, this level could well revert to resistance on any rally attempt. Broker bearishness (optimistic on economic growth), uncertainty over duration of US Fed’s QE3 (again optimism on econ growth), ETF outflows and fears of Eurozone nations selling the metal to pay for bailouts all spooking markets.

A reminder – Cyprus said on Friday it would try and sell €400m-worth of its gold, leading to fears that other countries could turn to a gold selloff to fund its needs.

As RANSquawk points out, poor GDP numbers from China will temper inflation (as well as knock other commodity prices).

While, bad retail figures from the US last week, and a more determined effort by the eurozone to keep an eye on inflation means the need to hedge with gold looks less important by the day.

Joe Weisenthal wrote over at Business Insider:

So the collapse in gold is not about gold, but about vindication for a large corpus of belief and economic research, which has largely panned out. It's great that our economic elites know what they're talking about, and have the tools at their disposal to address crises without creating some new catastrophe.

Things aren't great in the economy, but the collapse/hyperinflation fears haven't panned out, and the decline in gold is a manifestation of that.

8.44am BST

Troika statement on Greek deal

The Troika group of lenders – the European Commission, ECB and IMF – have put out a statement on the agreement reached with Greece this morning.

You can read the statement in its entirety here, but in short, it's very much steady-as-she-goes missive.

The mission and the authorities agreed that the economic outlook is largely unchanged from the previous review, with continued prospects for a gradual return to growth in 2014, supported by inflation well below the euro area average and improved wage flexibility, which are helping to restore the competitiveness of the Greek economy.

It says debt reduction has been achieved, more autonomy has been given to tax collectors, tax evasion and corruption has been tackled.

It added:

The mission also discussed with the authorities progress in strengthening the social safety net, including through targeted employment and training programmes supported by the EU, pilot programmes to extend unemployment benefits and provide minimum income support, a programme to provide access to primary health care for the uninsured, and a scheme to reduce the financial burden on indebted low-income households which have been severely affected by the crisis.

8.22am BST

Greece/Troika meetings

Over in Athens, the Greek government has been meeting with the Troika group of lenders.

Finance minister Yiannis Stournaras told waiting reporters that a deal has been reacted on a review of the country's austerity programme, adding that the Cyprus crisis will not change Greece's macro-economic situation.

Finally, he revealed the cuts have seen a primary budget surplus this year, which will be used to pay down public debt.

8.17am BST

Gold to April 2011 levels

Spot gold prices continue to fall, hitting ,450 an ounce, the lowest level in two years.

8.12am BST

Mining companies down

Bang on time, the FTSE 100's biggest fallers on opening are all mining companies, reacting to the Chinese data and commodity price falls.

Randgold (down -4.9%), Fresnillo (down 3.8%), Polymetal (down 3.2%), Evraz (down 3.2%), Rio Tinito (down 3%), ENRC (down 2.1%), Anglo American (down 1.9%), Antofagasta (down 1.9%), BHP Billiton (down 1.6%) and Xstrata (down 1.6%)

8.06am BST

Key Chinese data disappoints

Good morning and welcome to another day of rolling coverage of the eurozone crisis.

After the excitement of Friday's finance ministers get-together in Dublin and Cameron and Merkel's weekend together, today is slightly quieter, but we wait to see if the tumbles in commodities continue. Gold fell to an 18-month low, with oil and silver both down too.

Overnight, disappointing numbers came out of China, with Q1 GDP at 7.7% missing expectations of 8% and down from 7.9% last time.

Industrial production in March fell from 9.9% to 8.9%, missing expectations of 10.1%.

However, retail sales remained strong at 12.4%, up from 12.3% in February.

Meanwhile, in Venezuela, results of the country's general election are through, but political uncertainly in the oil-rich country could also have an impact on commodities.

We will be keeping an eye on all the reaction to the results and any other events to break throughout the day.

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

Published via the Guardian News Feed plugin for WordPress.