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| OECD slashes UK growth forecasts and warns on Brexit – as it happened | |
| (35 minutes later) | |
| 5.59pm BST | |
| 17:59 | |
| European markets close lower | |
| Downbeat manufacturing data from around the globe, warnings from the OECD about the outlook and the repercussions of Brexit, and continuing concerns about a US rate rise have combined to get the new month off to an uninspiring start for investors. European markets have closed lower across the board but have come off their worst levels after a slight recovery in the oil price on hopes of an output agreement at Thursday’s Opec meeting. The final scores showed: | |
| On Wall Street, the Dow Jones Industrial Average has recovered much of its earlier fall and is currently down just 16 points or 0.09%. | |
| On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow for, among other things, the latest European Central Bank meeting. | |
| 5.37pm BST | |
| 17:37 | |
| After the individual PMIs, the global index shows manufacturing stagnating: | |
| Global manufacturing sector stagnates in May, with J.P.Morgan Global Manufacturing #PMI down to 50.0 (50.1 in April) https://t.co/ZPVoBhTgs9 | |
| David Hensley at JP Morgan, which compiled the global index along with Marki, said: | |
| The May PMI data suggest that the global manufacturing sector remains in a low gear. Indices for output, new orders and the headline PMI were all at, or barely above, the stagnation mark. The move up in the finished goods inventory index suggests manufacturers are still working to realign stocks with demand. | |
| 5.34pm BST | 5.34pm BST |
| 17:34 | 17:34 |
| Of course, there are always conflicting reports ahead of any meeting of oil producers: | Of course, there are always conflicting reports ahead of any meeting of oil producers: |
| #WSJ #OPEC Members Remain Deeply Divided on Prospect of Limits | #WSJ #OPEC Members Remain Deeply Divided on Prospect of Limits |
| 4.28pm BST | 4.28pm BST |
| 16:28 | 16:28 |
| Oil prices have recovered from earlier losses following a Reuters report that Opec ministers meeting in Vienna on Thursday are likely to consider a new ceiling on output. | Oil prices have recovered from earlier losses following a Reuters report that Opec ministers meeting in Vienna on Thursday are likely to consider a new ceiling on output. |
| After falling as low as $48.65 a barrel, Brent crude is now up 0.12% at $49.95. | After falling as low as $48.65 a barrel, Brent crude is now up 0.12% at $49.95. |
| #OOTT #OIL | #OPEC MAY CONSIDER NEW OIL OUTPUT CEILING AT THURS MTG: RTRSREUTERS CITES 4 OPEC SOURCES ON NEW CEILING CONSIDERATION | #OOTT #OIL | #OPEC MAY CONSIDER NEW OIL OUTPUT CEILING AT THURS MTG: RTRSREUTERS CITES 4 OPEC SOURCES ON NEW CEILING CONSIDERATION |
| But: | But: |
| As a reminder, Russia will not be at the OPEC meeting and is no longer seeking a production freeze | As a reminder, Russia will not be at the OPEC meeting and is no longer seeking a production freeze |
| 3.36pm BST | 3.36pm BST |
| 15:36 | 15:36 |
| But the ISM manufactuing numbers are not essential for the Federal Reserve in its interest rate deliberations, said James Smith at ING Bank: | But the ISM manufactuing numbers are not essential for the Federal Reserve in its interest rate deliberations, said James Smith at ING Bank: |
| The ISM Manufacturing index surprised on the upside, ticking up from 50.8 to 51.3, rather than down to 50.3 as had been expected following a raft of weak regional surveys. Looking beneath the headline though, the headline was lifted solely by a large pick-up in the supplier deliveries index. Aside from that, most other components remained roughly where they were last time around... Overall though, the index remains only tentatively within growth territory (ie above 50), but crucially, this is a much better position than where it was around the turn of the year. | The ISM Manufacturing index surprised on the upside, ticking up from 50.8 to 51.3, rather than down to 50.3 as had been expected following a raft of weak regional surveys. Looking beneath the headline though, the headline was lifted solely by a large pick-up in the supplier deliveries index. Aside from that, most other components remained roughly where they were last time around... Overall though, the index remains only tentatively within growth territory (ie above 50), but crucially, this is a much better position than where it was around the turn of the year. |
| For the Federal Open Market Committee though, the ISM numbers are not essential in timing the next rate hike. Attention is now heavily centred on Friday’s labour report. In advance of this, some emphasis is likely to be put on the employment components of this, and to a greater extent the non-manufacturing ISM, although we’d note that neither are tightly correlated with non-farm payrolls. In any case, the employment component of the manufacturing ISM remained flat this time around. | For the Federal Open Market Committee though, the ISM numbers are not essential in timing the next rate hike. Attention is now heavily centred on Friday’s labour report. In advance of this, some emphasis is likely to be put on the employment components of this, and to a greater extent the non-manufacturing ISM, although we’d note that neither are tightly correlated with non-farm payrolls. In any case, the employment component of the manufacturing ISM remained flat this time around. |
| We think that the risk of an above consensus non-farm payrolls (NFP) reading (currently at 160,000) is higher than a sub-consensus one. Although we tend to agree that job creation may be slowing as the economy reaches a point close to full employment, we feel that the month-on-month volatility in the headline NFP means that something at or above what we consider to be the underlying trend (around 185,000) is reasonably likely. Never-the-less, we feel that this element of the labour report is not critical to the FOMC’s thinking at present. The Fed’s labour market “tick-box” has effectively already been ticked (and arguably has for several months) and the key now lies with the activity data, which has improved slightly after a weak first quarter. Thus, we feel that the answer to the June/July/September debate now lies with chair Yellen (who speaks next week) and we currently think that July is the most likely timing for the next hike. | We think that the risk of an above consensus non-farm payrolls (NFP) reading (currently at 160,000) is higher than a sub-consensus one. Although we tend to agree that job creation may be slowing as the economy reaches a point close to full employment, we feel that the month-on-month volatility in the headline NFP means that something at or above what we consider to be the underlying trend (around 185,000) is reasonably likely. Never-the-less, we feel that this element of the labour report is not critical to the FOMC’s thinking at present. The Fed’s labour market “tick-box” has effectively already been ticked (and arguably has for several months) and the key now lies with the activity data, which has improved slightly after a weak first quarter. Thus, we feel that the answer to the June/July/September debate now lies with chair Yellen (who speaks next week) and we currently think that July is the most likely timing for the next hike. |
| 3.29pm BST | 3.29pm BST |
| 15:29 | 15:29 |
| Both sets of US manufacturing figures may have come in better than expected but still show signs of weakness, said Connor Campbell at Spreadex: | Both sets of US manufacturing figures may have come in better than expected but still show signs of weakness, said Connor Campbell at Spreadex: |
| Both the Markit and ISM PMIs surpassed expectations (at 50.7 and 51.3 respectively), though the performance from the former still points to a slowdown month-on-month while the latter is hardly a world-beating number, being lower than the Eurozone’s own stagnant growth. | Both the Markit and ISM PMIs surpassed expectations (at 50.7 and 51.3 respectively), though the performance from the former still points to a slowdown month-on-month while the latter is hardly a world-beating number, being lower than the Eurozone’s own stagnant growth. |
| It is hard to tell whether the Dow’s negative start to the session stemmed from a) the general malaise that engulfed Europe this morning, b) the better than forecast PMIs giving a bit of extra heft to the Fed hawks or c) the fact that the manufacturing figures are still worryingly weak. | It is hard to tell whether the Dow’s negative start to the session stemmed from a) the general malaise that engulfed Europe this morning, b) the better than forecast PMIs giving a bit of extra heft to the Fed hawks or c) the fact that the manufacturing figures are still worryingly weak. |
| Regardless the Dow Jones plunged 90 points after the open before settling at a 60-ish point loss, leaving the index at its lowest price in around a week. | Regardless the Dow Jones plunged 90 points after the open before settling at a 60-ish point loss, leaving the index at its lowest price in around a week. |
| 3.14pm BST | 3.14pm BST |
| 15:14 | 15:14 |
| And there’s more for the US Federal Reserve to consider ahead of this month’s meeting, when a rate rise has still not been ruled out. | And there’s more for the US Federal Reserve to consider ahead of this month’s meeting, when a rate rise has still not been ruled out. |
| US construction spending fell 1.8% in April, the largest monthly decline since January 2011. March’s figure was revised up from a 0.5% rise to a 1.5% increase. | US construction spending fell 1.8% in April, the largest monthly decline since January 2011. March’s figure was revised up from a 0.5% rise to a 1.5% increase. |
| Analysts had been expecting the April figure to show a rise of 0.6%. | Analysts had been expecting the April figure to show a rise of 0.6%. |
| This piece of negative data in what has been a mixed batch of reports recently could see economists cutting their second quarter GDP forecasts. | This piece of negative data in what has been a mixed batch of reports recently could see economists cutting their second quarter GDP forecasts. |
| 3.06pm BST | 3.06pm BST |
| 15:06 | 15:06 |
| ISM vs Markit disconnect hitting epic proportions | ISM vs Markit disconnect hitting epic proportions |
| 3.04pm BST | 3.04pm BST |
| 15:04 | 15:04 |
| However there is a more positive sign from the ISM manufacturing survey. | However there is a more positive sign from the ISM manufacturing survey. |
| The manufacturing activity index came in at 51.3 in May, well ahead of expectations of a figure of 51.3, and ahead of April’s 50.8. | The manufacturing activity index came in at 51.3 in May, well ahead of expectations of a figure of 51.3, and ahead of April’s 50.8. |
| But the new orders index dipped from 55.8 in April to 55.7, while the employment index was flat at 49.2 after expectations of a rise to 49.7. | But the new orders index dipped from 55.8 in April to 55.7, while the employment index was flat at 49.2 after expectations of a rise to 49.7. |
| Updated | Updated |
| at 3.05pm BST | at 3.05pm BST |
| 2.58pm BST | 2.58pm BST |
| 14:58 | 14:58 |
| The manufacturing PMI provides another sign of a slowing US economy, says Chris Williamson, chief economist at Markit. He said: | The manufacturing PMI provides another sign of a slowing US economy, says Chris Williamson, chief economist at Markit. He said: |
| The survey data indicate that factory output fell in May at its fastest rate since 2009, suggesting that manufacturing is acting as a severe drag on the economy in the second quarter. | The survey data indicate that factory output fell in May at its fastest rate since 2009, suggesting that manufacturing is acting as a severe drag on the economy in the second quarter. |
| Payroll numbers are under pressure as factories worry about slower order book growth, in part linked to falling export demand but also as a result of growing uncertainty surrounding the presidential election. | Payroll numbers are under pressure as factories worry about slower order book growth, in part linked to falling export demand but also as a result of growing uncertainty surrounding the presidential election. |
| For those looking for a rebound in the economy after the lacklustre start to the year, the deteriorating trend in manufacturing is not going to provide any comfort. | For those looking for a rebound in the economy after the lacklustre start to the year, the deteriorating trend in manufacturing is not going to provide any comfort. |
| 2.49pm BST | 2.49pm BST |
| 14:49 | 14:49 |
| US manufacturing growth slowed slightly in May from the previous month, according to the latest Markit index. | US manufacturing growth slowed slightly in May from the previous month, according to the latest Markit index. |
| The final manufacturing PMI came in at 50.7, better than the preliminary estimate of 50.5, but down on the 50.8 recorded in April. Markit said this was the lowest level since September 2009. | The final manufacturing PMI came in at 50.7, better than the preliminary estimate of 50.5, but down on the 50.8 recorded in April. Markit said this was the lowest level since September 2009. |
| #UnitedStates Markit Manufacturing PMI Final at 50.7 https://t.co/tZxpcT4gBf pic.twitter.com/WnEx156SkP | #UnitedStates Markit Manufacturing PMI Final at 50.7 https://t.co/tZxpcT4gBf pic.twitter.com/WnEx156SkP |
| Markit: Weakest manufacturing performance for over six-and-a-half years https://t.co/GFVIEDZz9p | Markit: Weakest manufacturing performance for over six-and-a-half years https://t.co/GFVIEDZz9p |
| Updated | Updated |
| at 3.05pm BST | at 3.05pm BST |
| 2.38pm BST | 2.38pm BST |
| 14:38 | 14:38 |
| Wall Street opens 100 points lower | Wall Street opens 100 points lower |
| As forecast, US markets have started the trading day in negative territory. | As forecast, US markets have started the trading day in negative territory. |
| Falling oil prices and weak Chinese and European manufacturing data have combined to unsettle investors, who are already nervous at the prospect of another US interest rate rise. There is also caution ahead of Thursday’s European Central Bank meeting, and the US non-farm payroll numbers a day later. | Falling oil prices and weak Chinese and European manufacturing data have combined to unsettle investors, who are already nervous at the prospect of another US interest rate rise. There is also caution ahead of Thursday’s European Central Bank meeting, and the US non-farm payroll numbers a day later. |
| So the Dow Jones Industrial Average is currently down 120 points or 0.7% while the S&P 500 and Nasdq both opened around 0.4% lower. | So the Dow Jones Industrial Average is currently down 120 points or 0.7% while the S&P 500 and Nasdq both opened around 0.4% lower. |
| The FTSE 100 has fallen 1.1% or 69 points, while Germany’s Dax is down 0.8% and France’s Cac nearly 1%. | The FTSE 100 has fallen 1.1% or 69 points, while Germany’s Dax is down 0.8% and France’s Cac nearly 1%. |
| More US data is due shortly, with the Markit manufacturing PMI followed by the ISM manufacturing survey. | More US data is due shortly, with the Markit manufacturing PMI followed by the ISM manufacturing survey. |
| 2.23pm BST | 2.23pm BST |
| 14:23 | 14:23 |
| Wall Street is expected to follow Europe’s lead, and selloff when trading begins shortly. | Wall Street is expected to follow Europe’s lead, and selloff when trading begins shortly. |
| Dow looking set for a -80 start in ten minutes time, at 17,707 - 1 week low. | Dow looking set for a -80 start in ten minutes time, at 17,707 - 1 week low. |
| 2.22pm BST | 2.22pm BST |
| 14:22 | 14:22 |
| Helena Smith | Helena Smith |
| Over in Greece it’s been an eventful day in parliament where MPs have voted overwhelmingly to rescind a law that would have allowed them to have holdings in offshore companies. | Over in Greece it’s been an eventful day in parliament where MPs have voted overwhelmingly to rescind a law that would have allowed them to have holdings in offshore companies. |
| In a roll call vote deputies dropped a law that many - ironically - had failed to see when endorsing a 7,500-page multi-bill of creditor-mandated reforms ten days ago. The clause, revealed by a Sunday’s proto Thema newspaper, had caused prime minister Alexis Tsipras’ leftist led coalition extraordinary embarrassment. | In a roll call vote deputies dropped a law that many - ironically - had failed to see when endorsing a 7,500-page multi-bill of creditor-mandated reforms ten days ago. The clause, revealed by a Sunday’s proto Thema newspaper, had caused prime minister Alexis Tsipras’ leftist led coalition extraordinary embarrassment. |
| Tsipras was voted into power saying his Syriza party would abolish measures deemed to promote tax evasion. In a double whammy for the government, uproar over the clause has coincided with a tsunami of indirect taxes on luxury goods that comes into force today. | Tsipras was voted into power saying his Syriza party would abolish measures deemed to promote tax evasion. In a double whammy for the government, uproar over the clause has coincided with a tsunami of indirect taxes on luxury goods that comes into force today. |
| #Greece parliament overwhelmingly passes clause prohibiting ministers & MPs from owning foreign-domiciled corporations. #vouli | #Greece parliament overwhelmingly passes clause prohibiting ministers & MPs from owning foreign-domiciled corporations. #vouli |
| 2.08pm BST | 2.08pm BST |
| 14:08 | 14:08 |
| OECD sees deeper problems in Brazil | OECD sees deeper problems in Brazil |
| Brazilians have woken up to the news that they face an even deeper recession than expected. | Brazilians have woken up to the news that they face an even deeper recession than expected. |
| In today’s economic outlook, the OECD has predicted that Brazil’s GDP will shrink by 4.3% in 2016, as joblessness spikes. | In today’s economic outlook, the OECD has predicted that Brazil’s GDP will shrink by 4.3% in 2016, as joblessness spikes. |
| Back in February the OECD expected a 4.0% contraction this year, before the recent impeachment of Dilma Roussef gripped the country. | Back in February the OECD expected a 4.0% contraction this year, before the recent impeachment of Dilma Roussef gripped the country. |
| The OECD says: | The OECD says: |
| “The deep recession is set to continue in 2016 and in 2017 against the backdrop of high political uncertainty and ongoing corruption revelations that are undermining consumer and business confidence, leading to a continuous contraction in domestic demand. | “The deep recession is set to continue in 2016 and in 2017 against the backdrop of high political uncertainty and ongoing corruption revelations that are undermining consumer and business confidence, leading to a continuous contraction in domestic demand. |
| “As the economy shrinks, unemployment is set to rise further.” | “As the economy shrinks, unemployment is set to rise further.” |
| With inflation also worryingly high, and its Petrobras oil giant mired in its money-laundering scandal, the outlook for Brazil does looks very challenging. | With inflation also worryingly high, and its Petrobras oil giant mired in its money-laundering scandal, the outlook for Brazil does looks very challenging. |