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Mario Draghi hints eurozone stimulus will last - business live Mario Draghi hints eurozone stimulus will last - business live
(35 minutes later)
1.56pm GMT
13:56
The US, on the other hand, is set for a rate hike in December, most economists believe. Federal Reserve chair Janet Yellen hinted as much when she gave her testimony to Congress on Thursday, and Fed board member James Bullard has become the latest to back such a move. Reuters reports:
Federal Reserve policymaker James Bullard is leaning toward supporting an interest rate increase in December, he said on Friday, adding that a plethora of potential changes under incoming president Donald Trump could affect future policy.
St. Louis Federal Reserve President Bullard said the debate is now shifting toward the Fed’s rate path in 2017 and how Trump’s policies on taxes, infrastructure, spending and regulation will affect growth, productivity and ultimately Fed policy.
“Markets are currently putting a high probability on a December move by the FOMC. I’m leaning toward supporting that,” Bullard, a voting member of the U.S. central bank’s rate-setting committee, told a conference in Frankfurt. “I think the question now is more about 2017.”
Markets now put a 90 percent chance on the Fed hiking rates by 25 basis points on Dec 14.
Bullard said some of the new administration’s measures could have a significant impact on the economy in 2018 but some possible proposals to curb immigration and trade may take a decade to have a major impact.
1.50pm GMT
13:50
Strong economic data from the UK - the latest being better than expected retail sales figures for October - have put the idea of an interest rate cut on hold. Indeed, the next move is likely to be upwards, despite the Bank of England maintaining it was keeping its options open. But don’t expect a hike too soon, or indeed a hefty rise when it comes:
There's a lot of chat about the *improving* interest rate outlook. Markets reckon you should set your watch for 1% around 4 years from now. pic.twitter.com/zlIBSqgpbK
1.40pm GMT
13:40
Greece steps up calls for debt relief
Helena Smith
After an action-packed week highlighted by Barack Obama’s 30-hour visit to Athens, the Greek government has stepped up calls for debt relief, with officials saying it is only a matter of days before the country concludes a second bailout review that can formally open discussion of the issue.
In an interview with the Wall Street Journal, Greece’s straight-talking finance minister Euclid Tsakalotos said it would be “very shortsighted” if Greece’s monumental debt pile was not cut, echoing Obama’s assertion that people needed hope.
If the euro zone is going to survive, the number-one requirement is to make sure people see that the eurozone can solve its problems. If it just postpones political decisions and kicks the can down the road, then people will say it’s not working.
At almost 180 % of GDP, the debt mountain is widely believed to be unmanageable with both the IMF and the outgoing US president saying economic recovery now depends on at least part of it being written off.
Last night, the country’s hardline finance minister Wolfgang Schäuble shot down the suggestion, once again, saying it would be a deterrent to Greece forging ahead with reforms.
1.31pm GMT1.31pm GMT
13:3113:31
As Philip Hammond prepares to present his maiden autumn statement on Wednesday, speculation is mounting about possible rabbits out of hats.As Philip Hammond prepares to present his maiden autumn statement on Wednesday, speculation is mounting about possible rabbits out of hats.
The chancellor has already signalled that he will ease the pace of austerity set out by his predecessor George Osborne, but this does not mean he is planning big giveaways.The chancellor has already signalled that he will ease the pace of austerity set out by his predecessor George Osborne, but this does not mean he is planning big giveaways.
Berenberg’s Kallum Pickering believes the announcement could well underwhelm markets:Berenberg’s Kallum Pickering believes the announcement could well underwhelm markets:
With no immediate economic crisis to deal with, the new chancellor Phillip Hammond is unlikely to pander to markets’ desires and announce a major fiscal stimulus at next week’s autumn statement.With no immediate economic crisis to deal with, the new chancellor Phillip Hammond is unlikely to pander to markets’ desires and announce a major fiscal stimulus at next week’s autumn statement.
Despite the better-than-expected near-term economic performance, the long-term economic outlook remains highly uncertain.Despite the better-than-expected near-term economic performance, the long-term economic outlook remains highly uncertain.
Beyond the next couple of years, the long-term economic and fiscal outlook will be heavily influenced by the post-Brexit relationship between the UK and the EU. Pending such uncertainty, we anticipate a very cautious approach to fiscal policy from the new chancellor.Beyond the next couple of years, the long-term economic and fiscal outlook will be heavily influenced by the post-Brexit relationship between the UK and the EU. Pending such uncertainty, we anticipate a very cautious approach to fiscal policy from the new chancellor.
12.44pm GMT12.44pm GMT
12:4412:44
Volkswagen announces 30,000 jobs cutsVolkswagen announces 30,000 jobs cuts
Volkswagen, the German carmaker, is cutting 30,000 jobs as it restructures the business following the diesel emissions scandal.Volkswagen, the German carmaker, is cutting 30,000 jobs as it restructures the business following the diesel emissions scandal.
Most of the jobs - 23,000 - will go in Germany. VW’s chief executive, Matthias Müller, described it as the “biggest reform package in the history of our core brand”.Most of the jobs - 23,000 - will go in Germany. VW’s chief executive, Matthias Müller, described it as the “biggest reform package in the history of our core brand”.
Last year the company admitted it had falsified the results of 11 million emission tests on diesel cars.Last year the company admitted it had falsified the results of 11 million emission tests on diesel cars.
Read our full story on the cuts here:Read our full story on the cuts here:
UpdatedUpdated
at 1.10pm GMTat 1.10pm GMT
12.14pm GMT12.14pm GMT
12:1412:14
First Toblerone, now Maltesers:First Toblerone, now Maltesers:
Maltesers pouches have 'lost weight' according to one food retail expert https://t.co/uI4FiFGYddMaltesers pouches have 'lost weight' according to one food retail expert https://t.co/uI4FiFGYdd
And here’s a reminder of the Toblerone controversy:And here’s a reminder of the Toblerone controversy:
11.54am GMT11.54am GMT
11:5411:54
Next boss Lord Wolfson: high street prices will rise from JanuaryNext boss Lord Wolfson: high street prices will rise from January
Lord Wolfson, chief executive of Next, has told consumers to expect price rises on the high street from January, as the weak pound starts to feed through.Lord Wolfson, chief executive of Next, has told consumers to expect price rises on the high street from January, as the weak pound starts to feed through.
He told Bloomberg Television:He told Bloomberg Television:
I would expect it to begin to come through January next year. And really that inflationary bubble will last all year. But it is a one off bubble, it’s not likely to affect us the following year. It’s not likely to affect retail anything like as much as the devaluation of the pound.I would expect it to begin to come through January next year. And really that inflationary bubble will last all year. But it is a one off bubble, it’s not likely to affect us the following year. It’s not likely to affect retail anything like as much as the devaluation of the pound.
So the pound’s fallen 15, 20%. We’re expecting prices at most to go up 5% but I’m expecting a bit less than that. And the reason for that is because there’s a lot of spare capacity in factories in the far east and retail is constantly looking for new and better sources of supply, cheaper sources of supply. So I think we’ll be able to mitigate most of the currency fall. But we’re still looking at prices rises around 4-5%.So the pound’s fallen 15, 20%. We’re expecting prices at most to go up 5% but I’m expecting a bit less than that. And the reason for that is because there’s a lot of spare capacity in factories in the far east and retail is constantly looking for new and better sources of supply, cheaper sources of supply. So I think we’ll be able to mitigate most of the currency fall. But we’re still looking at prices rises around 4-5%.
11.28am GMT11.28am GMT
11:2811:28
JCB’s Staffordshire HQ hit by mini TornadoJCB’s Staffordshire HQ hit by mini Tornado
My colleague Sean Farrell reports:My colleague Sean Farrell reports:
Workers at JCB’s world headquarters in Staffordshire were stunned on Thursday when a mini tornado caused a wall to collapse and windows to crash to the ground.Workers at JCB’s world headquarters in Staffordshire were stunned on Thursday when a mini tornado caused a wall to collapse and windows to crash to the ground.
Production of diggers stopped after the tornado tore into the side of the factory. No one was injured in the incident and the factory was back up and running after 30 minutes. The damaged areas have been cordoned off.Production of diggers stopped after the tornado tore into the side of the factory. No one was injured in the incident and the factory was back up and running after 30 minutes. The damaged areas have been cordoned off.
JCB’s assembly manager, Richard Williams, said: “I was about 30 yards away at the time and I heard an enormous crash. I turned around and saw the wall and the windows had come out and a big whirlwind of leaves and branches blowing around outside. Luckily no one was in the vicinity at the time.”JCB’s assembly manager, Richard Williams, said: “I was about 30 yards away at the time and I heard an enormous crash. I turned around and saw the wall and the windows had come out and a big whirlwind of leaves and branches blowing around outside. Luckily no one was in the vicinity at the time.”
The JCB factory was one of the sites hit by winds of more than 70mph that battered Staffordshire, Shropshire and mid-Wales. Trees were uprooted and buildings were damaged as a series of small, brief tornadoes left a trail of destruction.The JCB factory was one of the sites hit by winds of more than 70mph that battered Staffordshire, Shropshire and mid-Wales. Trees were uprooted and buildings were damaged as a series of small, brief tornadoes left a trail of destruction.
UpdatedUpdated
at 11.29am GMTat 11.29am GMT
11.16am GMT11.16am GMT
11:1611:16
David Rees, senior markets economist at Capital Economics, says the bonds sell-off in emerging markets is likely to continue:David Rees, senior markets economist at Capital Economics, says the bonds sell-off in emerging markets is likely to continue:
Dollar-denominated government bonds have suffered disproportionately during the emerging market sell-off since Donald Trump won the US presidential election. We expect dollar-denominated bonds to continue to underperform equities and currencies.Dollar-denominated government bonds have suffered disproportionately during the emerging market sell-off since Donald Trump won the US presidential election. We expect dollar-denominated bonds to continue to underperform equities and currencies.
Whereas equity prices have fallen by 3.5% on average in local currency terms since the November 8th election, and currencies have depreciated by a similar amount against the US dollar, dollar- denominated sovereign bonds have registered losses of nearly 4.5% on average.Whereas equity prices have fallen by 3.5% on average in local currency terms since the November 8th election, and currencies have depreciated by a similar amount against the US dollar, dollar- denominated sovereign bonds have registered losses of nearly 4.5% on average.
The upshot is that we believe the underperformance of hard currency bonds will continue.The upshot is that we believe the underperformance of hard currency bonds will continue.
10.54am GMT10.54am GMT
10:5410:54
Global bonds rack up biggest losses in more than 25 yearsGlobal bonds rack up biggest losses in more than 25 years
Global bonds are on course for their biggest two-week loss in more than a quarter of a century, as rising inflation dampens demand.Global bonds are on course for their biggest two-week loss in more than a quarter of a century, as rising inflation dampens demand.
Barclays Global Aggregate Bond Index is set for a 4% loss over the last fortnight - the biggest since at least 1990 according to Reuters.Barclays Global Aggregate Bond Index is set for a 4% loss over the last fortnight - the biggest since at least 1990 according to Reuters.
Reuters reports:Reuters reports:
Donald Trump’s shock win in the US election last week has stoked bets that economic plans under a Trump administration would boost business investments and spending while firing up inflation.Donald Trump’s shock win in the US election last week has stoked bets that economic plans under a Trump administration would boost business investments and spending while firing up inflation.
Rising inflation erodes the value of bonds which offer set interest rates over their lifespan.Rising inflation erodes the value of bonds which offer set interest rates over their lifespan.
10.31am GMT
10:31
Bank of England's Broadbent defends low interest rates
Ben Broadbent, the deputy governor of the Bank of England responsible for monetary policy, has been speaking in London.
He insisted the prolonged spell of ultra-low interest rates had not driven a rise in inequality in the UK. The Bank has been under fire in recent weeks by critics who claim the loose monetary stance has hurt some households.
"If you are a forecaster you are used to being humbled", BoE's Ben Broadbent going for quote of the month
Here is the full report from my colleague Katie Allen who attended the event:
Updated
at 10.37am GMT
10.13am GMT
10:13
European markets fall
Europe’s major markets are now firmly in the red:
A strong dollar is hitting mining stocks, and Italian banks are also among the biggest losers.
Nerves are mounting in Italy ahead of next month’s referendum on constitutional reform. Prime Minister Matteo Renzi has said he will resign if he loses the referendum.
10.03am GMT
10:03
Jim O'Neill joins George Osborne's northern powerhouse thinktank
Lord Jim O’Neill, the former chief economist at Goldman Sachs, is joining the Northern Powerhouse Partnership, set up by the former chancellor George Osborne who chairs the thinktank.
Not an entirely surprising appointment. The two men worked together in government, after O’Neill was given a peerage and appointed to Osborne’s Treasury team last year with responsibility for the northern powerhouse project. (The idea is to drive investment and growth in the north.)
O’Neill stepped down as a Treasury minister in September and resigned the Conservative whip amid reported tensions over Theresa May’s approach to China.
The high-profile businessman is known for coining the phrase “Brics”, an acronym for the emerging economies of Brazil, Russia, India, China and South Africa.
O’Neill said:
Having been involved in its inception, I have always been a huge supporter of the Northern Powerhouse and through my participation in the Northern Powerhouse Partnership I look forward to continuing to play a role in ensuring that the original vision becomes a reality.
In a second appointment to the NPP, the former director general of the CBI John Cridland will also join the board.
Osborne said:
Today is a milestone in the creation of our Northern Powerhouse Partnership. Our first board meeting, here in Sheffield, brings together some of the north’s biggest employers and civic leaders to see how we can work together to create a powerhouse.
I am delighted that Jim O’Neill and John Cridland are also joining the board and getting involved in the Northern Powerhouse Partnership. They are both hugely regarded figures across the North and two of the brightest and the best when it comes to thinking proactively about how to drive transformational change for the region.
Updated
at 12.32pm GMT
9.20am GMT
09:20
Here is what Draghi had to say on eurozone inflation:
Despite the recovery in growth and employment, the persisting output gap is still keeping inflation dynamics weak. The October inflation rate stood at 0.5%. While this marks the highest level recorded in almost two years, it remains far below the ECB’s objective [of below, but close to 2%].
And while we expect headline inflation to continue rising over the coming months, much of this increase will be driven by statistical factors related to the mechanical unwinding of the extreme oil price declines a year ago. We do not yet see a consistent strengthening of underlying price dynamics.
Draghi said recovery in the eurozone’s economy was still underpinned by support from the central bank:
The euro area recovery still relies to a considerable degree on accommodative monetary policy. The recovery in credit is being facilitated by a more resilient banking sector, but the impetus comes from our monetary policy.
The eurozone’s economy grew by 2% in 2015, and the International Monetary Fund is predicting growth of 1.7% this year followed by 1.5% in 2017.
9.04am GMT
09:04
Draghi’s speech strikes a decidedly dovish and cautious note. He suggests that while the eurozone is in reasonable shape, key risks to the recovery remain.
We have ... every reason to be more confident in the strength of the recovery than we were one year ago. But we cannot be sanguine over the economic outlook.
Besides the geopolitical risks that remain prevalent, there are indeed three factors that warrant caution: the profitability of euro area banks, the relative weakness of inflation dynamics, and the dependence of the recovery on accommodative monetary policy.
Draghi: 3 factors warrant caution: bank profitability, relative weakness of inflation dynamics and dependence of recovery on monetary policy
Updated
at 9.05am GMT
8.40am GMT
08:40
Mario Draghi: ECB stimulus will last
Mario Draghi, the president of the European Central Bank, has given a clear signal that policymakers will continue to support the eurozone economy with monetary stimulus.
Giving a keynote speech at the European Banking Congress in Frankfurt, Draghi said policy would remain lose amid weak inflationary pressures.
Even if there are many encouraging trends in the euro area economy, the recovery remains highly reliant on a constellation of financing conditions that, in turn, depend on continued monetary support.
The ECB will continue to act, as warranted, by using all the instruments available within our mandate to secure a sustained convergence of inflation towards a level below, but close to 2%.
8.27am GMT
08:27
European markets are mixed in early trading
The FTSE 100 is slightly down in early trading, after closing up 45 points or 0.7% on Thursday.
Elsewhere in Europe, markets are mixed. Nerves persist in Italy, where bond yields are sharply higher as political concerns rise to the fore ahead of next month’s referendum.
The scores so far:
8.18am GMT
08:18
Holger Schmieding, economist at the German bank Berenberg, says the ECB won’t be in any hurry to follow the Fed and tighten monetary policy.
Pundits including us expect the ECB to prolong its current €80 billion monthly asset purchases by at least three and more likely six months beyond March 2017 before finally starting to taper, announcing that decision to extend purchases at its 8 December meeting.
In addition, the ECB will likely make some technical changes to its programme to broaden the scope of eligible (German) paper without changing the capital key distribution of purchases or breaking new ground by venturing into purchases of major new asset classes such as bank bonds or equities.
8.15am GMT
08:15
The euro against the dollar over the past year:
8.01am GMT
08:01
The agenda: euro in record losing streak as markets await Draghi speech
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The dollar’s gain is the euro’s loss, with strength in the US currency pushing the euro below $1.06 for the first time in almost a year. It is currently trading at $1.0596.
The single’s bloc’s currency is suffering its longest run of losses since 1999, when it first launch as an accounting currency, according to the FT’s analysis of Bloomberg data.
The dollar’s latest boost comes from Janet Yellen, the chair of the Federal Reserve, who hinted to Congress on Thursday that another rate hike in December was on the cards.
Mario Draghi, president of the European Central Bank, is due to give a speech in Frankfurt shortly. Investors will listen closely for his views on the current outlook for the eurozone, and any hints on possible changes to monetary policy.