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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
(about 1 hour later)
1.56pm BST
13:56
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:
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:
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
13:42
Here are the weekly jobless claims:
1.35pm BST
13:35
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.
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.
Updated
at 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 BST12.43pm BST
12:4312:43
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.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.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....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: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/P9VYqK7Jr9Today is the one-year anniversary of the Dow's last record high. (Intraday and closing)(via @peterschack) @CNBC pic.twitter.com/P9VYqK7Jr9
12.30pm BST12.30pm BST
12:3012:30
Over in Frankfurt, ECB chief Mario Draghi will be breaking out the best Prosecco.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.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....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*EUR/USD DROPS BELOW 1.1200, FIRST TIME SINCE MARCH 29
UpdatedUpdated
at 12.32pm BSTat 12.32pm BST
12.25pm BST12.25pm BST
12:2512:25
Oh dear.... Asda, Wal-Mart’s UK operation, has endured another shocking few months.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.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...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 supermarketOooof! 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...!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 BST12.06pm BST
12:0612:06
Shares in supermarket giant Wal-Mart just jumped by 5% in pre-market trading, after it released better-than-expected results.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: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/sCJVgqeZ9LShares of $WMT soaring nearly 5% after reporting positive earnings https://t.co/sCJVgqeZ9L
11.51am BST11.51am BST
11:5111:51
Wall Street is expected to join the selloff when it opens at 2.30pm BST (9.30am East Coast time)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.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: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.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.
UpdatedUpdated
at 11.53am BSTat 11.53am BST
11.25am BST11.25am BST
11:2511:25
Despite the hawkish tone of last night’s minutes, most economists don’t actually expect the Federal Reserve to raise interest rates next month.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.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.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.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: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 SeptemberRate 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"In my view June should be 50%-55% priced..." -- Citi's Steven Englander
10.55am BST10.55am BST
10:5510:55
After three hours of trading, the FTSE 100 is in full-blown retreat - down almost 90 points or 1.4% at 6079.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%.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.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 thirdRelated: 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.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.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.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 BST10.29am BST
10:2910:29
Brexit could be good for 1st time buyersBrexit could be good for 1st time buyers
The battle over Britain’s EU referendum has switched to that dinner party favourite - house prices.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.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.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.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'sRelated: 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.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.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/NyryVR3RiSPROJECT FEAR GOES NUCLEAR ON BRITISH NEUROSES https://t.co/NyryVR3RiS
10.20am BST
10:20
Ben Brettell, senior economist at Hargreaves Lansdown, says the rise in UK consumer spending last month is reassuring:
‘The UK economy’s glass was beginning to look decidedly half-empty, so today’s retail sales figures are a welcome tonic to the gloomy economic mood.
Diminishing confidence ahead of the EU referendum and weak pay growth were expected to take a toll on retail sales. Indeed market researcher GfK’s consumer sentiment indicator hit a 15-month low in April, which looked ominous for today’s figures, but in the event fears that the referendum would have a negative impact on consumer spending proved unfounded.
9.59am BST
09:59
The pound has hit a three and a half-month high against the euro.
Sterling has hit €1.305, up from €1.301 last night, thanks to those strong retail sales figures.
Everything must go! Another month of strong UK retail sales growth (4.3%y/y) coupled with price deflation (-2.8%y/y) pic.twitter.com/Vm6DDefUp1
9.47am BST
09:47
UK retail sales surge as Brits keep shopping
Here come the latest UK retail sales figures....and they’ve smashed forecasts!
The amount of stuff bought in the shops last month jumped by 4.3% compared with a year earlier, the Office for National Statistics reports. Sales volumes were also 1.3% higher than a month earlier.
There’s no sign of pre-Brexit jitters here. Instead, shoppers may have been spurred into action by the fact that average shop prices have fallen by 2.8% over the last year.
So many economists claim higher inflation as an economic cure. Yet lower inflation has plainly boosted UK Retail Sales! #GBP #BoE
In a WORLD lacking DEMAND, one country stands alone, ready to do WHATEVER IT TAKES to buy everything https://t.co/2vOVjokw30
Sales of most items jumped, but there was a 6.3% drop in clothing turnover. That may be due to cold weather in April, which put people off from buying summer garments.
Melanie Richard, ONS Head of Retail Sales, said:
“Clothing stores remain the main drag on growth in the retail sector, with sales hampered by unseasonal weather. However, both the volume and value of sales increased in April compared with March as lower prices boosted sales.
Updated
at 9.54am BST
9.32am BST
09:32
The selloff is gathering pace across Europe, with the main indices all losing ground this morning:
Tom Floyd, Senior Sales Trader at Foenix Partner, says investors are taking last night’s Fed minute seriously:
With multiple Fed speakers in recent days failing to convince markets of the possibility of June hikes, yesterday’s Minutes seem to have finally done the trick. The Minutes showed Fed members would deem a June hike as “appropriate” so long as economic data continued to improve. With inflation data trending towards target and improving labour market conditions, the Fed’s remaining issue was convincing markets a rise was a likely scenario.
9.24am BST
09:24
The first Harry Potter readers have long since left the classroom for the world of adult mugglehood.
But Hogwart’s finest continues to work his charms for UK publishers, Bloomsbury. They have reported a 5% jump in revenues for the last year, thanks to a 133% surge in sales of Harry Potter books.
That includes a new illustrated version of “Harry Potter and the Philosopher’s Stone”, which apparently went down terribly well.
Bloomsbury say:
Reviews were consistently good with the Telegraph saying the book was: “a triumph - a book so alive it seems to jump, explode and slither out of your hands as you read.”
We sold rights in Jim Kay’s illustrations in 28 languages. Our re-jacketed Jonny Duddle editions of the seven Harry Potter novels continued to perform strongly in all territories.
An illustrated version of the Chamber of Secrets is coming soon, along with new content from J. K. Rowling for the new edition of Fantastic Beasts & Where to Find Them.
It’s a case of “Revenues leviosa!”, say those wizards at fastFT....
Updated
at 9.27am BST
8.38am BST
08:38
Angela Monaghan
Peter Fankhauser, chief executive of Thomas Cook, is also calling for a shake-up in the school holiday system to help parents get cheaper holidays.
He tells reporters that:
“UK authorities should look across the pond to Germany and Switzerland where they agree a staggered start of school holiday dates. That relieves some of the pressure. If you had an agreement from local authorities in the UK to spread the dates... that would help us as well, it would help everybody.”
Fankhauser said Thomas Cook was doing “everything we can” to make holidays more affordable for families who face huge hikes in prices during the school holidays.
To get the best deal: “you have to start early in the cycle”, he said.
Last week, a UK parent won a landmark case in the High Court against his local authority, after he took his daughter away on holiday during term time.
The ruling appeared to give the green light for parents to take their children out of state schools without permission so long as they have a good record of attendance. The government, though, quickly vowed to close this new loophole....
Updated
at 8.54am BST
8.24am BST
08:24
Thomas Cook hit by terrorism fears
Shares in Thomas Cook have fallen by 15% to a three-year low, after it reported a 5% drop in summer bookings.
The holiday company warned this morning that underlying profits will hit the bottom of analyst expectations. It reported that tourists are shunning Turkey, where a suicide bomber killed 10 Germans in an Istanbul square in January.
Turkey had been Thomas Cook’s second most popular destination last year; in 2016, though, more tourists are choosing the Balearics (up 14%), Canaries (up 23%) and and USA (up 29%).
Thomas Cook says:
Demand for Turkey - our second largest market last year - remains significantly below last year’s levels. This has impacted our German Airlines business in particular.
Demand for holidays to Belgium is also down, following the Brussels terrorist attacks in March.
And that sent shares down to 75p, the lowest since March 2013.
It will be a tough summer for #ThomasCook: bookings for this year's holiday season are down 5% overall - shares down 15% in London.
Updated
at 8.30am BST
8.10am BST
08:10
FTSE 100 takes a dive
The London stock market has shed 50 points, or 0.8%, at the start of trading.
Mining shares are leading the selloff, with silver miner Fresnillo sliding by 5%.
That’s because the prospect of higher US interest rates is pushing up the US dollar, and driving down commodity prices.
Other European markets are also dropping, with the German DAX shedding 1% and the French CAC down 0.5%.
8.03am BST
08:03
Asian stock markets fall
Most Asian stock markets are in the red today after the Federal Reserve put a June interest rate rise on the table.
The Singapore and Hong Kong indices are leading the selloff
Investors are baulked at the prospect of tightening of monetary policy, as Andrew Sullivan, sales trader at Haitong Securities explains (via Associated Press)
“Markets have looked for government stimulus as a reason for investing rather than good company economics or fundamentals. Obviously therefore if there’s less chance of stimulus people are left wondering what to do.
“Yes it will be a shock to people, and I’m sure there will be a knee jerk reaction but the reality is we are nowhere near normal rates.”
Only Japan has avoided any damage -- because Tokyo traders are pleased to see the yen weakening against the US dollar.
7.31am BST
07:31
The Agenda: Fed's June warning looms over City
Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business.
Coming up today...
We’ll be tracking the reaction to last night’s Federal Reserve minutes, which showed that America’s central bank could be ready to raise interest rates next month.
The Fed surprised investors by revealing that many policymakers believe a June rate hike is appropriate, if economic data over the next few weeks justifies it.
As we covered in last night’s liveblog, the minutes of April’s meeting showed that:
“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the [Fed’s] 2% objective, then it likely would be appropriate for the [Fed] to increase the target range for the federal funds rate in June.”
And that has sent investors scrambling to adjust their expectations - as many had only expected one rate rise in 2016, or even none at all.
Related: Interest rates could rise as soon as June, Federal Reserve suggests
The minutes also sent the dollar spiking last night, and is likely to weigh on European markets today.
Our European opening calls:$FTSE 6109 down 57$DAX 9887 down 56$CAC 4293 down 26$IBEX 8727 down 48$MIB 17611 down 102
Also coming up today …
**Today highlights**UK Retail Sales, ECB Minutes, Initial Jobless Claims, Fed's Fischer, Dudley and BoE's Vlieghe
There’s quite a flurry of financial results this morning, including: Thomas Cook, Mothercare, Bloomsbury Publishing, Royal Mail, drinks firm Britvic, construction firm Balfour Beatty, financial services group Hargreaves Lansdown and asset manager 3i. We’ll pick the most interesting bits out...
There could be fireworks in Germany today, where Deutsche Bank is holding its AGM:
Deutsche Bank faces angry shareholders at today's AGM as stocks have underperformed under chairman Achleitner. pic.twitter.com/QV8wbv14TK
And leading finance minister are heading to Japan, for a G7 meeting, but I don’t think there’s any action today.
Updated
at 8.07am BST