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You can find the current article at its original source at https://www.theguardian.com/business/live/2016/may/19/markets-us-rate-hike-uk-retail-sales-live
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| Version 15 | Version 16 |
|---|---|
| Markets hit by fears of US June rate hike – as it happened | Markets hit by fears of US June rate hike – as it happened |
| (35 minutes later) | |
| 6.25pm BST | 6.25pm BST |
| 18:25 | 18:25 |
| Markets record hefty falls | Markets record hefty falls |
| The increasing fear that the US Federal Reserve could raise interest rates next month, earlier than expected, has sent global markets tumbling. Following Wednesday’s more hawkish than expected Fed minutes, a number of the central bank’s key figures have lined up to suggest the June meeting is “live” in terms of a possible rate hike. | The increasing fear that the US Federal Reserve could raise interest rates next month, earlier than expected, has sent global markets tumbling. Following Wednesday’s more hawkish than expected Fed minutes, a number of the central bank’s key figures have lined up to suggest the June meeting is “live” in terms of a possible rate hike. |
| Joshua Mahony, market analyst at IG, said: | Joshua Mahony, market analyst at IG, said: |
| Anxiety is setting in for financial markets, as the proposition of another rate hike from the Fed draws the bears out once more. Today’s US open has seen the Dow crash to a two month low, bringing the FTSE down with it as rate sensitive banks benefit at the expense of the wider market. The US dollar strength continues to be a running theme, as energy, metal and materials producers suffer at the hands of a yet another sea of red for the sector. | Anxiety is setting in for financial markets, as the proposition of another rate hike from the Fed draws the bears out once more. Today’s US open has seen the Dow crash to a two month low, bringing the FTSE down with it as rate sensitive banks benefit at the expense of the wider market. The US dollar strength continues to be a running theme, as energy, metal and materials producers suffer at the hands of a yet another sea of red for the sector. |
| Yesterday’s Fed minutes provided the latest clue that perhaps a June rate hike may not be such a crazy idea, with the markets now factoring in a 32% chance of action. This shift from 4% on Monday to 32% today goes a long way to explain the substantial rise in the US dollar this week. With a hawkish Fed and a three year high in US CPI, the potential implications of a strong jobs report in June is starting to click in the minds of investors. | Yesterday’s Fed minutes provided the latest clue that perhaps a June rate hike may not be such a crazy idea, with the markets now factoring in a 32% chance of action. This shift from 4% on Monday to 32% today goes a long way to explain the substantial rise in the US dollar this week. With a hawkish Fed and a three year high in US CPI, the potential implications of a strong jobs report in June is starting to click in the minds of investors. |
| With the dollar rising on the interest rate outlook, commodity prices fell back, including copper hitting a three month low and Brent crude losing 1% to $48.33. So mining companies were among the leading fallers, as were travel companies in the wake of a disappointing update from Thomas Cook and the disappearance of a flight from Paris to Cairo. But banks benefited from hopes that any US rate rise would support their balance sheets. The final scores showed: | With the dollar rising on the interest rate outlook, commodity prices fell back, including copper hitting a three month low and Brent crude losing 1% to $48.33. So mining companies were among the leading fallers, as were travel companies in the wake of a disappointing update from Thomas Cook and the disappearance of a flight from Paris to Cairo. But banks benefited from hopes that any US rate rise would support their balance sheets. The final scores showed: |
| On Wall Street, the Dow Jones Industrial Average is currently down 140 points or 0.8%. | On Wall Street, the Dow Jones Industrial Average is currently down 140 points or 0.8%. |
| On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow. | On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow. |
| 6.21pm BST | 6.21pm BST |
| 18:21 | 18:21 |
| Katie Allen | Katie Allen |
| If the US Federal Reserve is considering raising interest rates, then the Bank of England may be heading in the opposite direction. Katie Allen reports: | If the US Federal Reserve is considering raising interest rates, then the Bank of England may be heading in the opposite direction. Katie Allen reports: |
| A top Bank of England policymaker has warned that even if Britain votes to stay in the EU, underlying weakness in the economy could require more support from the central bank. | A top Bank of England policymaker has warned that even if Britain votes to stay in the EU, underlying weakness in the economy could require more support from the central bank. |
| Jan Vlieghe, one of the nine policymakers who vote on interest rates, has previously floated the idea of them being cut below zero. Speaking on Thursday, he again raised the prospect of rates coming down further from their record low of 0.5%, when he said the economy could require “additional monetary stimulus” if it does not rebound after a remain vote in the EU referendum on 23 June. | Jan Vlieghe, one of the nine policymakers who vote on interest rates, has previously floated the idea of them being cut below zero. Speaking on Thursday, he again raised the prospect of rates coming down further from their record low of 0.5%, when he said the economy could require “additional monetary stimulus” if it does not rebound after a remain vote in the EU referendum on 23 June. |
| Updated | |
| at 6.52pm BST | |
| 5.33pm BST | 5.33pm BST |
| 17:33 | 17:33 |
| Helena also reports that Handelsblatt, the German financial daily, says lenders may agree to give Greece a much large tranche of bailout aid once the reform package is passed than earlier thought. “Instead of the scheduled €5.7bn, the ailing country could receive €9bn to €11bn.” | Helena also reports that Handelsblatt, the German financial daily, says lenders may agree to give Greece a much large tranche of bailout aid once the reform package is passed than earlier thought. “Instead of the scheduled €5.7bn, the ailing country could receive €9bn to €11bn.” |
| That would be enough to keep it solvent until the end of the year - both delaying another potentially explosive financial review and allowing lenders to sort out their own differences over how to deal with Greece’s staggering €321bn debt load | That would be enough to keep it solvent until the end of the year - both delaying another potentially explosive financial review and allowing lenders to sort out their own differences over how to deal with Greece’s staggering €321bn debt load |
| But while politically expedient, senior Athens-based EU diplomats also admit that it does not resolve the underlying problem of Greece’s economic fundamentals simply not adding up. | But while politically expedient, senior Athens-based EU diplomats also admit that it does not resolve the underlying problem of Greece’s economic fundamentals simply not adding up. |
| 5.30pm BST | 5.30pm BST |
| 17:30 | 17:30 |
| Helena Smith | Helena Smith |
| More from Athens where a war of words has broken out on the first day of debate over the controversial omnibus bill the government has brought to parliament outlining the latest reforms the country must take. Helena Smith reports: | More from Athens where a war of words has broken out on the first day of debate over the controversial omnibus bill the government has brought to parliament outlining the latest reforms the country must take. Helena Smith reports: |
| At 7,500 pages the omnibus bill was never going to be passed lightly. And MPs, faced with the daunting task of reading it, have ensured that debate has got off to a tumultuous start. | At 7,500 pages the omnibus bill was never going to be passed lightly. And MPs, faced with the daunting task of reading it, have ensured that debate has got off to a tumultuous start. |
| Highlighting the explosive mood, the former prime minister Antonis Samaras accused the leftist-led government of legislating practically everything it had ever denounced. “It is increasing Enfia [property tax] that it said it would abolish … and heating oil which we reduced,” said the ex-conservative leader listing the various levies his successor Alexis Tsipras has agreed to raise in return for further bailout funds. | Highlighting the explosive mood, the former prime minister Antonis Samaras accused the leftist-led government of legislating practically everything it had ever denounced. “It is increasing Enfia [property tax] that it said it would abolish … and heating oil which we reduced,” said the ex-conservative leader listing the various levies his successor Alexis Tsipras has agreed to raise in return for further bailout funds. |
| “And the worst thing: we brought results. Now they [creditors] don’t believe [Athens] will bring results. And that is why they are imposing an automatic fiscal brake,” he added referring to the mechanism that will trigger automatic across-the-board cuts in the event of Greek finances veering off course. | “And the worst thing: we brought results. Now they [creditors] don’t believe [Athens] will bring results. And that is why they are imposing an automatic fiscal brake,” he added referring to the mechanism that will trigger automatic across-the-board cuts in the event of Greek finances veering off course. |
| Since being replaced by Tsipras in January 2015, Samaras has made few public interventions. | Since being replaced by Tsipras in January 2015, Samaras has made few public interventions. |
| In a caustic statement released in the last ten minutes, Tsipras’ office said: “Samaras should speak publicly more often so that citizens can remember his time in power when the country’s GDP was destroyed [fell] by 25 %.” | In a caustic statement released in the last ten minutes, Tsipras’ office said: “Samaras should speak publicly more often so that citizens can remember his time in power when the country’s GDP was destroyed [fell] by 25 %.” |
| Opposition parties are describing the fiscal break as amounting to the enforcement of a fourth bailout for a populace already hit by runaway unemployment and poverty. On the eve of the debate beginning, the finance ministry announced that the mechanism would not be included in the omnibus bill but would be tabled “as an amendment” at a later date. Insiders admit they cannot agree with lenders over the cuts that will be made should it be activated next year. | Opposition parties are describing the fiscal break as amounting to the enforcement of a fourth bailout for a populace already hit by runaway unemployment and poverty. On the eve of the debate beginning, the finance ministry announced that the mechanism would not be included in the omnibus bill but would be tabled “as an amendment” at a later date. Insiders admit they cannot agree with lenders over the cuts that will be made should it be activated next year. |
| 4.14pm BST | 4.14pm BST |
| 16:14 | 16:14 |
| *DUDLEY: 2Q SEEMS TO SHAPING UP TO BE STRONGER THAN 1Q GDP #nothard | *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 | 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: | 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: FINANCIAL CONDITIONS ABSOLUTELY DO MATTER |
| *DUDLEY: SURPRISED MKT DIDN'T PAY MORE ATTENTION TO FED SPEAKERS | *DUDLEY: SURPRISED MKT DIDN'T PAY MORE ATTENTION TO FED SPEAKERS |
| Updated | Updated |
| at 4.16pm BST | at 4.16pm BST |
| 4.01pm BST | 4.01pm BST |
| 16:01 | 16:01 |
| June definitely a live meeting - NY Fed president | 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. | 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. | 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 | Updated |
| at 4.08pm BST | at 4.08pm BST |
| 3.56pm BST | 3.56pm BST |
| 15:56 | 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. | 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 | 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): | 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. | 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. | 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 BST | 3.41pm BST |
| 15:41 | 15:41 |
| 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. |
| Updated | Updated |
| at 3.42pm BST | at 3.42pm BST |
| 3.10pm BST | 3.10pm BST |
| 15:10 | 15:10 |
| 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/AvjpVheDzK | A triple-top down to 5900 could on be the cards if #FTSE100 breaks decisively below 6050 pic.twitter.com/AvjpVheDzK |
| 2.51pm BST | 2.51pm BST |
| 14:51 | 14:51 |
| This time it's different? pic.twitter.com/sXrFgu61r3 | This time it's different? pic.twitter.com/sXrFgu61r3 |
| 2.47pm BST | 2.47pm BST |
| 14:47 | 14:47 |
| Wall Street opens lower | Wall 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 BST | 2.30pm BST |
| 14:30 | 14:30 |
| 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. ECONOMY | After 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 BST | 2.06pm BST |
| 14:06 | 14:06 |
| 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 BST | 1.56pm BST |
| 13:56 | 13:56 |
| 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 BST | 1.42pm BST |
| 13:42 | 13:42 |
| Here are the weekly jobless claims: | Here are the weekly jobless claims: |
| 1.35pm BST | 1.35pm BST |
| 13:35 | 13:35 |
| US jobless claims fall | US 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. |
| Updated | Updated |
| at 1.36pm BST | at 1.36pm BST |