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Markets hit by fears of US June rate hike – business live Markets hit by fears of US June rate hike – business live
(35 minutes later)
4.14pm BST
16:14
*DUDLEY: 2Q SEEMS TO SHAPING UP TO BE STRONGER THAN 1Q GDP #nothard
certainly compared with what we might have expected at the start of week that's a much bigger commitment to idea of a June hike from Dudley
And, given the falls seen in stock markets since Wednesday’s more hawkish than expected Federal Reserve minutes:
*DUDLEY: FINANCIAL CONDITIONS ABSOLUTELY DO MATTER
*DUDLEY: SURPRISED MKT DIDN'T PAY MORE ATTENTION TO FED SPEAKERS
Updated
at 4.16pm BST
4.01pm BST
16:01
June definitely a live meeting - NY Fed president
Back with the Fed, and New York Fed president William Dudley has added more comments about possible rate rises.
He has echoed the comments elsewhere that June is a live meeting, and that the Fed believes markets were underestimating the probability of a rate rise. He said a June or July move was a reasonable expectation, if his forecasts for the way the US economy is going appear on track. But again, he added that the risk of the UK leaving the EU was one that needed to be considered, and the probability of Brexit will influence the Fed’s decision.
Updated
at 4.08pm BST
3.56pm BST
15:56
Over to Greece, and the International Monetary Fund has said debt relief negotiations for the country need to focus on extended maturity periods and very low interest rates.
IMF: Greek debt needs to be restructured with long grace period, extended maturities, very low interest rates
The IMF reportedly wanted a halt to Greek debt repayments until 2040, but spokesman Gerry Rice would not confirm this in his regular news briefing. But he said (quote from Reuters):
We have exchanged preliminary views with our partners on general principles regarding debt relief. We believe that it is possible to restore debt sustainability without upfront haircuts, although this would involve providing very concessional loan terms, including long grace and maturity periods and very low interest rates.
The Greek parliament is due to vote on the latest series of reform measures over the weekend, ahead of the latest Eurogroup meeting next Tuesday.
3.41pm BST3.41pm BST
15:4115:41
New York Federal Reserve president William Dudley has repeated that interest rate changes are very much dependent on the economic data at the time.New York Federal Reserve president William Dudley has repeated that interest rate changes are very much dependent on the economic data at the time.
In a speech confirming the Fed’s desire to help households and businesses understand how the economy is progressing and how that helps determine the Fed’s decisions, he said:In a speech confirming the Fed’s desire to help households and businesses understand how the economy is progressing and how that helps determine the Fed’s decisions, he said:
When asked about the trajectory for the monetary policy stance, I always point out that it is data dependent. The Federal Open Market Committee calibrates the stance of monetary policy to best achieve our twin objectives of price stability and maximum sustainable employment, taking into account our forecast for how the economy is evolving. This forecast reflects the ongoing flow of the data. Data releases that are close to our expectations have little additional impact on the forecast, while data releases that deviate significantly from our expectations can lead to more significant revisions of the forecast. It is, therefore, important for market participants and households to be able to follow the data along with the FOMC and to understand how we are likely to interpret and react to incoming data.When asked about the trajectory for the monetary policy stance, I always point out that it is data dependent. The Federal Open Market Committee calibrates the stance of monetary policy to best achieve our twin objectives of price stability and maximum sustainable employment, taking into account our forecast for how the economy is evolving. This forecast reflects the ongoing flow of the data. Data releases that are close to our expectations have little additional impact on the forecast, while data releases that deviate significantly from our expectations can lead to more significant revisions of the forecast. It is, therefore, important for market participants and households to be able to follow the data along with the FOMC and to understand how we are likely to interpret and react to incoming data.
UpdatedUpdated
at 3.42pm BSTat 3.42pm BST
3.10pm BST3.10pm BST
15:1015:10
The market fall is accelerating as Wall Street’s losses increase, following the suggestion from the US Federal Reserve minutes that a June rate rise could be on the cards.The market fall is accelerating as Wall Street’s losses increase, following the suggestion from the US Federal Reserve minutes that a June rate rise could be on the cards.
The Dow Jones Industrial Average is now down 159 points or 0.9%, while Germany’s Dax has dropped 1.2% and France’s Cac has fallen 0.58%.The Dow Jones Industrial Average is now down 159 points or 0.9%, while Germany’s Dax has dropped 1.2% and France’s Cac has fallen 0.58%.
In the UK the FTSE 100 is 110 points lower at 6055, a fall of 1.7%.In the UK the FTSE 100 is 110 points lower at 6055, a fall of 1.7%.
A triple-top down to 5900 could on be the cards if #FTSE100 breaks decisively below 6050 pic.twitter.com/AvjpVheDzKA triple-top down to 5900 could on be the cards if #FTSE100 breaks decisively below 6050 pic.twitter.com/AvjpVheDzK
2.51pm BST2.51pm BST
14:5114:51
This time it's different? pic.twitter.com/sXrFgu61r3This time it's different? pic.twitter.com/sXrFgu61r3
2.47pm BST2.47pm BST
14:4714:47
Wall Street opens lowerWall Street opens lower
The prospect of a US rate hike as early as June has helped push American markets lower at the start of trading.The prospect of a US rate hike as early as June has helped push American markets lower at the start of trading.
With the oil price also falling - West Texas Intermediate is down around 2% at $47.15 a barrel - the Dow Jones Industrial Average has slipped 51 points or 0.32%. The S&P 500 and Nasdaq both opened around 0.4% lower.With the oil price also falling - West Texas Intermediate is down around 2% at $47.15 a barrel - the Dow Jones Industrial Average has slipped 51 points or 0.32%. The S&P 500 and Nasdaq both opened around 0.4% lower.
2.30pm BST2.30pm BST
14:3014:30
Another Fed speaker, in the form of vice chairman Stanley Fischer, but there appear to be few clues to the next rate hike in his comments.Another Fed speaker, in the form of vice chairman Stanley Fischer, but there appear to be few clues to the next rate hike in his comments.
In a speech - entitled (Money), Interest and Prices: Patinkin and Woodford - at an economics conference in New York, he said:In a speech - entitled (Money), Interest and Prices: Patinkin and Woodford - at an economics conference in New York, he said:
Faster trend growth would increase the long-run equilibrium interest rate, and what we need most, now that we are near full employment and approaching our target inflation rate, is faster potential growth.Faster trend growth would increase the long-run equilibrium interest rate, and what we need most, now that we are near full employment and approaching our target inflation rate, is faster potential growth.
[The equilibrium rate is the level of borrowing costs associated with stable inflation and full employment, according to Reuters].[The equilibrium rate is the level of borrowing costs associated with stable inflation and full employment, according to Reuters].
After all that anticipation - *FISCHER DOESN'T COMMENT ON CURRENT FED POLICY, U.S. ECONOMYAfter all that anticipation - *FISCHER DOESN'T COMMENT ON CURRENT FED POLICY, U.S. ECONOMY
Fischer is a snoozefest - doesn't comment on monetary policy. "Over to you Dudders...!"Fischer is a snoozefest - doesn't comment on monetary policy. "Over to you Dudders...!"
New York Federal Reserve president William Dudley is due to speak in an hour or so.New York Federal Reserve president William Dudley is due to speak in an hour or so.
2.06pm BST2.06pm BST
14:0614:06
There is a strong case for the US to raise interest rates in June, but there might be grounds to wait until July after the UK’s EU referendum, according to Richmond Federal Reserve president Jeffery Lacker.There is a strong case for the US to raise interest rates in June, but there might be grounds to wait until July after the UK’s EU referendum, according to Richmond Federal Reserve president Jeffery Lacker.
Lacker, a notable hawk but non-voting member at the moment, told Bloomberg Radio that a vote for the UK to leave the EU posed risks to the UK and Europe and could spill over to the US.Lacker, a notable hawk but non-voting member at the moment, told Bloomberg Radio that a vote for the UK to leave the EU posed risks to the UK and Europe and could spill over to the US.
*LACKER: BREXIT MIGHT BE GROUNDS FOR FED TO WAIT UNTIL JULY*LACKER: BREXIT MIGHT BE GROUNDS FOR FED TO WAIT UNTIL JULY
He said the markets took the wrong signal from the Fed’s decision to leave rates on hold at its last two meetings, overestimating how likely it was to leave rates unchanged in future.He said the markets took the wrong signal from the Fed’s decision to leave rates on hold at its last two meetings, overestimating how likely it was to leave rates unchanged in future.
Lacker said he was comfortable with four rate rises this year, and had supported an increase at April’s meeting.Lacker said he was comfortable with four rate rises this year, and had supported an increase at April’s meeting.
1.56pm BST1.56pm BST
13:5613:56
Meanwhile, there are only tenuous signs of growth according to the latest Philadephia Federal Reserve survey.Meanwhile, there are only tenuous signs of growth according to the latest Philadephia Federal Reserve survey.
The current business conditions index came in at -1.8 in May compared to -1.6 in the previous month, and the consensus of +3.5. The Fed said:The current business conditions index came in at -1.8 in May compared to -1.6 in the previous month, and the consensus of +3.5. The Fed said:
Firms responding to the Manufacturing Business Outlook Survey continued to report tenuous growth this month. The indicator for general activity was essentially unchanged in May and remained slightly negative. Other broad indicators also reflected general weakness in business conditions. The indicator for employment improved but remained negative. Manufacturers’ forecasts of future activity tempered slightly from last month, overall, but continue to suggest confidence in future growth.Firms responding to the Manufacturing Business Outlook Survey continued to report tenuous growth this month. The indicator for general activity was essentially unchanged in May and remained slightly negative. Other broad indicators also reflected general weakness in business conditions. The indicator for employment improved but remained negative. Manufacturers’ forecasts of future activity tempered slightly from last month, overall, but continue to suggest confidence in future growth.
It concluded:It concluded:
The survey’s indicators for general activity, new orders, shipments, and employment all remained negative. Though indicators for future conditions fell from last month, expectations for future growth continue to be positive.The survey’s indicators for general activity, new orders, shipments, and employment all remained negative. Though indicators for future conditions fell from last month, expectations for future growth continue to be positive.
1.42pm BST1.42pm BST
13:4213:42
Here are the weekly jobless claims:Here are the weekly jobless claims:
1.35pm BST1.35pm BST
13:3513:35
US jobless claims fallUS jobless claims fall
Another sign of the strength of the US economy - and therefore another sign that the Federal Reserve may want to raise interest rates next month - has come from the weekly jobless claims.Another sign of the strength of the US economy - and therefore another sign that the Federal Reserve may want to raise interest rates next month - has come from the weekly jobless claims.
The number of Americans filing for unemployment benefit fell by 16,000 to 278,000 last week, although analysts had been expecting a decline to 275,000. Still, the weekly rate has been below 300,000 for 63 weeks in a row, a sign of the strong jobs market.The number of Americans filing for unemployment benefit fell by 16,000 to 278,000 last week, although analysts had been expecting a decline to 275,000. Still, the weekly rate has been below 300,000 for 63 weeks in a row, a sign of the strong jobs market.
The previous week’s claims had been at a 14 month high.The previous week’s claims had been at a 14 month high.
UpdatedUpdated
at 1.36pm BSTat 1.36pm BST
1.32pm BST
13:32
Commenting on the minutes, economist Howard Archer at IHS Global Insight said:
The account of the 20-21 April policy meeting reinforces belief that the ECB is firmly in “wait and see mode” following March’s delivery of a major package of stimulative measures. However, the minutes do indicate that the ECB is prepared to eventually act again if deemed necessary.
The account also brings out the ECB’s determination to strongly defend itself from recent intensified German criticism over its highly expansionary policy.
1.30pm BST
13:30
The European Central Bank has followed the Fed’s lead, and just released the minutes of its own April meeting.
But rather than hint at rate hikes, the ECB is firing a warning shot at some of its critics, particularly in Germany.
The minutes state:
“There was general agreement that there was a need to counter the perception that monetary policy could no longer contribute to a return of inflation (to the ECB’s target).”
“In light of recent public criticism...in a Member State, it was viewed as important to reaffirm collectively the independence of the ECB in the pursuit of its mandate.”
That independence looked under threat last month, when German finance minister Wolfgang Schauble blamed the ECB for fuelling the popularity of the anti-immigrant, eurosceptic Alternative for Deutschland party.
ECB chief Mario Draghi, though, slapped down such criticism at his April press conference -- pointing out that undermining the ECB simply hampered its ability to drag Europe’s economy forwards.
The minutes also show that the ECB is in ‘wait and see’ mode, having announced new stimulus measures in March. It cautions that:
“patience was needed for the measures to fully unfold over time in terms of output and inflation”.
And the governing council also urged Europe’s politicians to do more, saying they:
“strongly reiterated the need for other policy areas to contribute much more decisively.”
The minutes are online here.
Updated
at 1.37pm BST
12.43pm BST
12:43
The old advice to ‘sell in May and go away’ worked quite well in 2015 – if you timed your entry back into the market right.
It’s exactly a year since the Dow Jones hits its record high - closing at 18,312 points. It then suffered quite a dive in August, due to worries over China.
And although it then recovered, it then suffered another selloff around new year before reviving again....
Last night it closed at 17,526, 4% lower than a year ago:
Today is the one-year anniversary of the Dow's last record high. (Intraday and closing)(via @peterschack) @CNBC pic.twitter.com/P9VYqK7Jr9
12.30pm BST
12:30
Over in Frankfurt, ECB chief Mario Draghi will be breaking out the best Prosecco.
The euro has just hit a seven week low against the US dollar, as the greenback continues to benefit from the Fed’s hawkishness.
A weaker euro should help to drag Europe’s inflation rate away from zero, and help exporters too....
*EUR/USD DROPS BELOW 1.1200, FIRST TIME SINCE MARCH 29
Updated
at 12.32pm BST
12.25pm BST
12:25
Oh dear.... Asda, Wal-Mart’s UK operation, has endured another shocking few months.
Like-for-like sales across Asda’s stores slumped by 5.7% in the first quarter of 2016. That’s only slightly better than the 5.8% drop in the final quarter of 2015.
Clearly the price-wars and heavy competition in Britain’s supermarkets isn’t letting up...
Oooof! Asda 5.7% slide in like-for-likes. More sales pain for the UK Walmart owned supermarket
Asda sales in 13 weeks to 30th March fell 5.7% - 7th successive quarterly fall. No wonder they cancelled the quarterly press conference...!
12.06pm BST
12:06
Shares in supermarket giant Wal-Mart just jumped by 5% in pre-market trading, after it released better-than-expected results.
Wal-Mart posted earnings of $0.98 per share, compared to estimate of $0.88 per share. Revenues also beat forecasts:
Shares of $WMT soaring nearly 5% after reporting positive earnings https://t.co/sCJVgqeZ9L
11.51am BST
11:51
Wall Street is expected to join the selloff when it opens at 2.30pm BST (9.30am East Coast time)
The Dow Jones is currently being called down 71 points, or around 0.4%, at 17454. But there is some US data due in the next coouple of hours to maybe shift the mood.
Connor Campbell of SpreadEx explains:
Whilst Europe has seen a nasty US rate-hike chatter-inspired decline this morning (the DAX and CAC joining the FTSE with 1.5% and 0.9% plunges respectively), the Dow futures aren’t quite as calamitous just yet. It looks like the US index will open just shy of half a percent lower after the bell, but with Philly Fed manufacturing index and jobless claims figures to come before the session begins. There are also speeches this afternoon from Fed vice-chair William Dudley and FOMC member Stanley Fischer, with investors likely keen to hear their take on the chances of a June rate-hike.
Updated
at 11.53am BST
11.25am BST
11:25
Despite the hawkish tone of last night’s minutes, most economists don’t actually expect the Federal Reserve to raise interest rates next month.
Derivatives traders are now pricing in a 32% probability that the Fed hikes rates at its June 14-15 meeting. That’s up from 4% last week.
Some analysts believe the Fed will be reluctant to move, just a week before the UK’s EU referendum. Policymakers may also want to hold off until they receive growth figures for the second quarter of 2016, in July.
The team at RBC Capital Markets believe the Fed is signalling its ability to hike, rather than actually setting the scene for action in June.
Here’s some more views:
Rate hike probabilities pulled forward following Wednesday's Fed minutes, market sees a 61.8% chance the next hike happens in September
"In my view June should be 50%-55% priced..." -- Citi's Steven Englander
10.55am BST
10:55
After three hours of trading, the FTSE 100 is in full-blown retreat - down almost 90 points or 1.4% at 6079.
Mining stocks continue to lead the fallers, with Fresnillo, Anglo American and BHP Billiton all down around 5%.
Royal Dutch Shell has shed 4.5%, due to the oil price dropping back to $47.70 per barrel today. And Royal Mail have dropped 4%, after reporting a 33% drop in pre-tax profits in a ‘challenging’ market.
Related: Royal Mail profits slump by a third
Chris Beauchamp, Senior Market Analyst at IG, blames “a hawkish set of Fed minutes and poor results from a number of firms” for today’s selloff.
The Fed has put the market on notice for June, and for the moment the market doesn’t like it. Equities have sold off heavily this morning as investors scramble to reallocate funds towards those areas likely to benefit from rising rates in the US – namely the US dollar, Treasuries and also US bank stocks.
As a result, the rug has been pulled from underneath European markets, with the news of the EgyptAir tragedy having an impact on airline and travel names.
10.29am BST
10:29
Brexit could be good for 1st time buyers
The battle over Britain’s EU referendum has switched to that dinner party favourite - house prices.
Moodys, the rating agency, has predicted this morning that first-time homebuyers in the UK would benefit from a vote to leave the EU.
They argue that prices would fall following a Brexit vote, and there could also be less competition for housing.
Buy-to-let landlords could also suffer from lower demand, particularly in London if the capital became less attractive to citizens from overseas.
Related: First-time buyers would benefit from Brexit, says Moody's
The National Association of Estate Agents also believes that house prices would be hit by a Brexit vote.
It reckons homeowners in London could lose as much as £7,500, while homes elsewhere in the UK could lose £2,300.
PROJECT FEAR GOES NUCLEAR ON BRITISH NEUROSES https://t.co/NyryVR3RiS