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Brexit recession fears fade as UK service sector beats forecasts – Business Live
Brexit recession fears fade as UK service sector beats forecasts – Business Live
(35 minutes later)
3.46pm BST
15:46
Oil prices are moving even higher after a surprise decrease in US crude stocks.
EIA Weekly Oil Inventories (Sep 30)Crude -2.98 Mln v +1.50 Mln exp, prev -1.88 MlnCushing +0.57 Mln v +0.36 Mln exp, prev -0.63 Mln
Brent crude is currently up 2% at $51.93 while West Texas Intermediate has jumped 2.3% to $49.84.
3.39pm BST
15:39
Elsewhere the International Monetary Fund has weighed in on Deutsche Bank, saying it was one of the banks which needed to convince investors its business model was viable in a low interest rate environment. The bank’s shares have fallen sharply on concerns about its balance sheet and the consequences of a possible $14bn fine by the US Department of Justice.
At the IMF meeting in Washington, the fund’s monetary and capital markets deputy director Peter Dattels said (quotes from Reuters):
Deutsche Bank... is among banks that need to continue to adjust to convince investors that its business model is viable going forward and has addressed the issues of operational risk arising from litigation.
He said the German authorities were closely monitoring Deutsche Bank’s health and that the European financial system remained resilient.
3.32pm BST
3.32pm BST
15:32
15:32
And the non-farms?
And the non-farms?
#US: Strong or weak jobs report for September on Friday? Markit #PMI's and #ISM's tell two different stories... pic.twitter.com/tN4cOH4el1
#US: Strong or weak jobs report for September on Friday? Markit #PMI's and #ISM's tell two different stories... pic.twitter.com/tN4cOH4el1
3.18pm BST
3.18pm BST
15:18
15:18
But which should investors look at most, the Markit or ISM figures?
But which should investors look at most, the Markit or ISM figures?
#US: Should markets listen to the weak Markit #PMI's or the strong #ISM's? They send two different signals about US Q3 #GDP growth pic.twitter.com/8n26iaQ6mw
#US: Should markets listen to the weak Markit #PMI's or the strong #ISM's? They send two different signals about US Q3 #GDP growth pic.twitter.com/8n26iaQ6mw
3.16pm BST
3.16pm BST
15:16
15:16
Despite these strong service sector figures Dennis de Jong, managing director at UFX.com, believes a US rate rise before December is unlikely:
Despite these strong service sector figures Dennis de Jong, managing director at UFX.com, believes a US rate rise before December is unlikely:
After slipping to a six-year low in August, the news that September’s ISM non-manufacturing PMI has rebounded strongly will be welcomed by Fed Chair Janet Yellen.
After slipping to a six-year low in August, the news that September’s ISM non-manufacturing PMI has rebounded strongly will be welcomed by Fed Chair Janet Yellen.
The US economy has been sending out mixed signals in recent months, and the uncertainty has not been helped by the speculation swirling around a long-anticipated interest rate hike.
The US economy has been sending out mixed signals in recent months, and the uncertainty has not been helped by the speculation swirling around a long-anticipated interest rate hike.
Today’s positive figures make the case for a rate rise stronger but, as we enter the final weeks of the presidential race, the general consensus is that it is unlikely we will see any movement before December.
Today’s positive figures make the case for a rate rise stronger but, as we enter the final weeks of the presidential race, the general consensus is that it is unlikely we will see any movement before December.
But the surveys could be an indicator for Friday’s jobs figures:
But the surveys could be an indicator for Friday’s jobs figures:
Robust #ISM PMIs could edge softer than fcast #ADP data and point to #Nonfarm #payrolls above 170K
Robust #ISM PMIs could edge softer than fcast #ADP data and point to #Nonfarm #payrolls above 170K
3.13pm BST
3.13pm BST
15:13
15:13
Anthony Nieves, chair of the ISM’s non-manufacturing survey committee, said:
Anthony Nieves, chair of the ISM’s non-manufacturing survey committee, said:
The comments from the respondents are mostly positive about business conditions and the overall economy. A degree of uncertainty does exist due to geopolitical conditions coupled with the upcoming U.S. presidential election.
The comments from the respondents are mostly positive about business conditions and the overall economy. A degree of uncertainty does exist due to geopolitical conditions coupled with the upcoming U.S. presidential election.
And here are some of the comments highlighted by the ISM:
And here are some of the comments highlighted by the ISM:
3.03pm BST
3.03pm BST
15:03
15:03
The Institute for Supply Management service sector survey is also positive, even more so in fact.
The Institute for Supply Management service sector survey is also positive, even more so in fact.
Its non-manufacturing PMI came in at 57.1 in September, showing a strong rebound from 51.4 in August and well above estimates of a figure of 53. This is the highest level since October 2015 and the biggest rise in the index since February 2011.
Its non-manufacturing PMI came in at 57.1 in September, showing a strong rebound from 51.4 in August and well above estimates of a figure of 53. This is the highest level since October 2015 and the biggest rise in the index since February 2011.
Updated
Updated
at 3.08pm BST
at 3.08pm BST
2.59pm BST
2.59pm BST
14:59
14:59
US service sector improves in September
US service sector improves in September
The first of the US service sector surveys shows a better than expected performance in September.
The first of the US service sector surveys shows a better than expected performance in September.
The Markit services final purchasing managers’ index came in at 52.3 compared to an initial reading of 51.9 and a figure of 51 in August. This is the highest level since April.
The Markit services final purchasing managers’ index came in at 52.3 compared to an initial reading of 51.9 and a figure of 51 in August. This is the highest level since April.
Markit’s final composite PMI figure for September was 52.3, up from the first reading of 52 and August’s 51.5.
Markit’s final composite PMI figure for September was 52.3, up from the first reading of 52 and August’s 51.5.
Markit: " the economy is growing at anannualized rate of only 1%"
Markit: " the economy is growing at anannualized rate of only 1%"
Markit: " Across both manufacturing and services the surveys point to the smallest monthly gain in jobs since April 2010"
Markit: " Across both manufacturing and services the surveys point to the smallest monthly gain in jobs since April 2010"
Updated
Updated
at 3.01pm BST
at 3.01pm BST
2.49pm BST
2.49pm BST
14:49
14:49
Wall Street opens higher
Wall Street opens higher
With oil prices continuing to rise - West Texas Intermediate is up 1.9% at $49.63 a barrel - US markets are heading higher.
With oil prices continuing to rise - West Texas Intermediate is up 1.9% at $49.63 a barrel - US markets are heading higher.
The Dow Jones Industrial Average is currently up 99 points or 0.5% while the S&P 500 and Nasdaq Composite both opened around 0.3% higher.
The Dow Jones Industrial Average is currently up 99 points or 0.5% while the S&P 500 and Nasdaq Composite both opened around 0.3% higher.
2.34pm BST
2.34pm BST
14:34
14:34
2.32pm BST
2.32pm BST
14:32
14:32
The ADP report still shows a strong jobs market, said Mark Zandi, chief economist of co-complier Moody’s Analytics:
The ADP report still shows a strong jobs market, said Mark Zandi, chief economist of co-complier Moody’s Analytics:
The current record of consecutive monthly job gains continued in September. With job openings at all-time highs and layoffs near all-time lows, the job market remains in full-swing. Job growth has moderated in recent months, but only because the economy is finally returning to full-employment.
The current record of consecutive monthly job gains continued in September. With job openings at all-time highs and layoffs near all-time lows, the job market remains in full-swing. Job growth has moderated in recent months, but only because the economy is finally returning to full-employment.
But Ahu Yildirmaz, vice president and head of the ADP Research Institute, said:
But Ahu Yildirmaz, vice president and head of the ADP Research Institute, said:
Job gains in September eased a bit when compared to the past 12-month average. We also observed softening this month in trade/transportation/utilities, possibly due to a continued tightening U.S. labor market and lackluster consumer spending.
Job gains in September eased a bit when compared to the past 12-month average. We also observed softening this month in trade/transportation/utilities, possibly due to a continued tightening U.S. labor market and lackluster consumer spending.
2.24pm BST
14:24
US jobs data disappoints
Ahead of more key US data - services surveys later and the non-farm payrolls on Friday - came the monthly private sector jobs figures, and they have proved disappointing.
According to payrolls processor ADP, US private employers added 154,000 jobs in September, below the 166,000 figure expected by economists. This was the smallest increase since April. August’s number was revised down from a 177,000 increase to 175,000.
But previewing the ADP numbers Michael Hewson, chief market analyst at CMC Markets, suggested they were no real guide to the non-farm numbers:
In the US the warm up act for Friday’s non-farm payrolls report is the ADP Payrolls report for September. Sadly this report has given little indication in recent months of being any sort of bellwether to its bigger brother, being remarkably stable in and around the 175k level for the last 4 months [before September].
2.16pm BST
14:16
Utility shares have been weak all day on reports that Theresa May might hit out at the charges the companies make on consumers, and sure enough she said:
Where companies are exploiting the failures of the market in which they operate, where consumer choice is inhibited by deliberately complex pricing structures, we must set the market right...
It’s just not right that two thirds of energy customers are stuck on the most expensive tariffs.
So SSE is down 1.5%, National Grid is nearly 2% lower and water companies United Utilities, Severn Trent and Pennon are down between 2% and 3% (although a downbeat note from RBC Capital is not helping the last three).
2.07pm BST
14:07
By attacking ultra-loose monetary policy, Theresa May might actually have put a floor under the pound.
Sterling is still hovering around $1.272, up from this morning’s 31-year lows. Investors may have concluded that it’s a little harder for the Bank of England to ease monetary policy again in November. Especially when the economic data is still better than feared.
Kathleen Brooks, research director at City Index, explains:
May certainly doesn’t mince her words, and since she spoke we have seen a slight uptick in the pound versus both the dollar and the euro.
The FTSE 100 is also off of its lows of the day, although it still remains comfortably above 7,000. This may seem counter-intuitive, but ultra low interest rates are not great for the banking sector, so May’s words could boost this sector and thus the pound and the FTSE 100 at the same time.
Of course, the BOE is independent, so May’s government should not be able to change policy. But her words could be enough to ease some of the downward pressure that has been building on the pound and could be enough to trigger a mini rally, potentially back above 1.28 in GBP/USD.
1.56pm BST
13:56
Theresa May’s speech, and her criticism of the Bank of England’s monetary policy, has gone down rather badly with that beacon of free market ideology, the Adam Smith Institute.
Director Sam Bowman sounds like a man whose eyebrows got a thorough workout during the PM’s speech, saying:
[There isn’t] any evidence that clamping down on EU immigration will help British workers, but we will have to borrow more if immigration falls because they pay in more than they cost. Or that quantitative easing has made us worse off – the evidence suggests that without it the post-crisis recession would have been deeper and longer.
“Mrs May’s speech was the opposite of pragmatic. We call on the Prime Minister to abandon her ideological attachment to interventionist economic policies, look at the evidence, and accept that it tells us that markets, not the state, are the solution to our problems.”
1.47pm BST
13:47
IMF sounds alarm over ultra-low interest rates
Newsflash: The International Monetary Fund has warned that pension funds and insurance groups could be wiped out by the current era of ultra-low interest rates.
From Washington, our economics editor Larry Elliott reports:
Insurance companies and pension funds are at risk of becoming insolvent if ultra-low interest rates persist for a prolonged period, the International Monetary Fund has warned.
After almost eight years in which central banks have kept borrowing costs at record lows in an attempt to boost growth, the IMF said an over-reliance on monetary policy could have unwanted side-effects.
It used its half-yearly health check of the global financial system to advise that the calmer-than-expected conditions since the Brexit vote might not last.
While short-term risks had abated over the past six months, the IMF said big challenges remained – including the impact of record-low interest rates on pension funds and insurance companies, the fragility of banks, rapid credit growth in China and the heavy indebtedness of the corporate sector in emerging countries.
“The solvency of many life insurance companies and pension funds is threatened by a prolonged period of low interest rates,” the IMF said in its global financial stability report (GFSR).
Here’s Larry’s piece:
This makes Theresa May’s intervention on monetary policy even more intriguing....
1.10pm BST
13:10
Theresa May will have pleased many older Brits by attacking the Bank of England’s stimulus programme.
She’s absolutely right that QE has driven up assets prices; the whole idea is that central banks mop up ‘safe’ assets such as government bonds, and encourage investors to move money into risky things.
Great if you own a house, a trust fund or a Canaletto... less good if you’re relying on the income from savings.
But.... central banks have been driven into ever-deeper stimulus efforts by the failure of the global economy to bounce back from the 2008 crisis. And governments must take some blame.
In the UK, George Osborne’s austerity budgets relied heavily on the Bank of England propping up demand with record low interest rates.
European central bankers have been dropping heavy hints for months that fiscal policy needs to do more work, and that they’re running short of ammo.
Perhaps May has got the message.....
May on monetary policy interesting - a political economy shift. Previous preferred macro mix of tight fiscal/easy money being dropped.
Updated
at 1.12pm BST
12.45pm BST
12:45
May: Monetary policy must change
Wowzers.... Theresa May has just fired a broadside at the Bank of England over its stimulus programme.
She’s addressing the Tory faithful in Birmingham now, and (in between outlining her Brexit vision and promising a clampdown on tax dodgers), she blasted the era of ultra-low interest rates and bond-buying.
May declared:
While monetary policy with super low rates and quantitative easing have provided emergency medicine, we have to acknowledge some of the bad side effects. People with assets have got richer, while people without have not…
A change has got to come, and we are going to deliver it because that’s what a Conservative government can do.
That sounds like a serious intervention into monetary policy, frankly, aimed at governor Mark Carney (who, as a Canadian, may already be concerned about the Tory’s attacks on firms who hire foreign workers)
Our Politics Liveblog has all the details:
Updated
at 1.14pm BST
12.38pm BST
12:38
Over in Greece, air traffic control workers have called a strike in protest at proposals to reform their industry.
The shake-up is part of the country’s bailout programme, and due to be debated by MPs later this week.
Reuters has the details:
Greek air traffic controllers plan to walk off the job over four days from October 9th, grounding flights in protest at changes to their job descriptions under reforms pursued by the country’s foreign creditors.
Their union said on Wednesday they would stage 24-hour strikes on October 9th and 10th, and October 12th-13th inclusive. All but emergency and search-and-rescue flights along with flights through the Athens Flight Information region would be suspended.
Walkouts by Greek air traffic controllers, a department considered an essential service, have in the past been deemed illegal by Greek courts and been cancelled. The announcement on industrial action coincided with the submission of draft legislation to parliament on Tuesday evening seeking to introduce changes to the structure of the civil aviation department.
So any Brits who can still afford to fly to Greece following the pound’s tumble may have a problem (unless the courts step in...).
12.13pm BST
12:13
How low could the pound go, as Britain rattles towards triggering article 50 next March (or earlier).
Koon How Heng, a senior foreign-exchange strategist at Credit Suisse, believes sterling could easily hit $1.25, or lower...
He told CNBC that he still has “a very negative view on sterling”.
“Officially, our forecast for sterling dollar is at 1.25.
“We would think it’s going to head lower. It’s probably going to go down the tubes.”
"Down the tubes" https://t.co/Pxu7nE7XcN
11.55am BST
11:55
There’s a subdued feeling on City trading floor today, after the FTSE 100 failed (just) to hit a new alltime high yesterday.
The blue-chip index has shed almost 0.6%, or 40 points, to 7034 - despite Tesco soaring higher after impressing investors with its financial results today.
And the smaller FTSE 250, which did hit a record high last night, has lost 0.7%.
European stock markets are also in the red, today, following reports that the European Central Bank might wind back its bond-buying stimulus programme.
Currently, the ECB is creating €80bn of new money each month to buy new bonds. Bloomberg says that policymakers have considered tapering it -- steadily trimming the monthly purchases.
Although the ECB denies discussing tapering, the prospect of the easy money tap being turned down has depressed the markets.
Joshua Mahony, market analyst at IG, explains:
The bullish sentiment that drove yesterday’s sensational rise in the FTSE has been dampened today, with markets largely responding to the fears that perhaps the seemingly unlimited ECB QE could be limited after all. Rumours of exit plans being drawn up at the ECB highlight the growing feeling that Draghi & co are facing up to a exhaustion of monetary policy policies and effectiveness.
