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Markets move higher as Japanese growth beats forecasts, but EU data disappoints - live Markets move higher as Japanese growth beats forecasts, but EU data disappoints - live
(35 minutes later)
11.14am BST
11:14
Portuguese GDP grows 2.8% year on year
News from Portugal, where GDP grew by 2.8% year on year in the second quarter, the same level as the previous three months. The quarter on quarter increase was 0.2%, down from 1% in the first quarter, according to the statistics office.
Domestic demand remained strong but exports of goods and services continued to be weak.
#Portugal #GDP Growth Rate year-on-year Prel at 2.8% https://t.co/mUIwlblc6b pic.twitter.com/1MqwbMm6fn
#Portugal #GDP Growth Rate QoQ Prel at 0.2% https://t.co/o9PhlMR2av pic.twitter.com/tMGTwEJoFX
Updated
at 11.15am BST
11.03am BST
11:03
Despite the weaker than expected eurozone industrial production figures, there is no need to worry too much, says ING Bank economist Bert Colijn:
The recovery of Eurozone industry remains somewhat cautious as strong growth in May has been followed by a 0.6% drop in June. Most indicators point to accelerating growth in production, but data for June suggests that any acceleration from the trend of recent years has yet to happen.
We see the Eurozone boom of 2017 everywhere except in the industrial production numbers. While the growth in new orders for manufacturing has been well above 6% YoY for several months now, industrial production has dropped back to 2.6% YoY growth, which is not much better than what has been seen since 2014. It is somewhat disappointing that production has yet to recover to its pre-crisis level. With the start of the crisis now ten years ago, industrial production is still 6.5% below its peak. After this lost decade for Eurozone industry, a stronger recovery could be expected. Production data is notoriously volatile and subject to revisions, so a break in trend often only emerges after a few months of data.
Due to strength in orders and businesses noting strong improvements in production, it seems that an improved trend for production is still in the cards. This would indicate that the surprising growth in the Eurozone could continue in the second half of the year. But while a weaker June reading actually makes an acceleration in the third quarter easier, the manufacturing PMI fell to a six-month low in July. This false start to the quarter was also seen in other surveys, which could mean that 3Q GDP will be a touch weaker than the first half of the year, but that would still lead to a healthy 2% annual GDP growth rate for 2017. No need to become pessimistic about the Eurozone just yet.
10.47am BST10.47am BST
10:4710:47
The fall in European stocks is not just due to the worries about the growing tension between the US and North Korea, says David Cheetham, chief market analyst at XTB:The fall in European stocks is not just due to the worries about the growing tension between the US and North Korea, says David Cheetham, chief market analyst at XTB:
Whilst the selling seen in stocks in the past week was widely attributed to the US-N.Korea story there has in fact been a fairly prolonged period of declines for European indices. The Eurostoxx for instance made a 2017 peak back in May and has since fallen by more than 7% to last week’s low.Whilst the selling seen in stocks in the past week was widely attributed to the US-N.Korea story there has in fact been a fairly prolonged period of declines for European indices. The Eurostoxx for instance made a 2017 peak back in May and has since fallen by more than 7% to last week’s low.
The market now trades back at a similar level to where it was prior to the 1st round of the French election, after which Macron’s progression sparked a strong move to the upside as the seeming avoidance of a populist party gaining power sparked a sharp rally in stocks. Whilst it is tempting to feel that the current weakness will now cease as the prospect of a nuclear war seemingly recedes, there were other factors weighing on the Eurostoxx - such as the local currency appreciation - that will likely persist.The market now trades back at a similar level to where it was prior to the 1st round of the French election, after which Macron’s progression sparked a strong move to the upside as the seeming avoidance of a populist party gaining power sparked a sharp rally in stocks. Whilst it is tempting to feel that the current weakness will now cease as the prospect of a nuclear war seemingly recedes, there were other factors weighing on the Eurostoxx - such as the local currency appreciation - that will likely persist.
10.33am BST10.33am BST
10:3310:33
Markets continue to recover some ground on hopes that the tensions between the US and North Korea have eased.Markets continue to recover some ground on hopes that the tensions between the US and North Korea have eased.
The FTSE 100 is now up 0.5%, while Germany’s Dax is up more than 1% and France’s Cac has climbed 0.9%. Joshua Mahony, market analyst at IG, said:The FTSE 100 is now up 0.5%, while Germany’s Dax is up more than 1% and France’s Cac has climbed 0.9%. Joshua Mahony, market analyst at IG, said:
European equity markets appear to have left the fears of late last week behind, with investors coming out of their defensive positions to move back into riskier assets. Chinese involvement in the recent spat between North Korea and the US has been one of the biggest calming influences, highlighting that for the US to go to war with North Korea it must first go through China.European equity markets appear to have left the fears of late last week behind, with investors coming out of their defensive positions to move back into riskier assets. Chinese involvement in the recent spat between North Korea and the US has been one of the biggest calming influences, highlighting that for the US to go to war with North Korea it must first go through China.
However, with China moving to implement a ban on whole host of North Korean products (such as coal, lead, and fish), it is clear that it is aware that something needs to be done to reign in the rebellious neighbours. Today has precious few major economic releases out of Europe and the US, with traders instead focusing on the shift out of havens, while preparing for a busy week ahead.However, with China moving to implement a ban on whole host of North Korean products (such as coal, lead, and fish), it is clear that it is aware that something needs to be done to reign in the rebellious neighbours. Today has precious few major economic releases out of Europe and the US, with traders instead focusing on the shift out of havens, while preparing for a busy week ahead.
Those havens, which were in demand last week among the uncertainty, are out of favour now, with gold down around $8 an ounce at $1281:Those havens, which were in demand last week among the uncertainty, are out of favour now, with gold down around $8 an ounce at $1281:
Gold: an easing of geopolitical tensions and technical resistance at $1,300 have collided to thwart XAU ahead of this key level. pic.twitter.com/xZoeOekyq5Gold: an easing of geopolitical tensions and technical resistance at $1,300 have collided to thwart XAU ahead of this key level. pic.twitter.com/xZoeOekyq5
Meanwhile the weaker than expected Chinese data earlier has seen oil slip back, with Brent crude down 0.5% at $51.8 a barrel, and also kept the lid on metal prices.Meanwhile the weaker than expected Chinese data earlier has seen oil slip back, with Brent crude down 0.5% at $51.8 a barrel, and also kept the lid on metal prices.
10.08am BST10.08am BST
10:0810:08
Eurozone industrial production disappointsEurozone industrial production disappoints
Some underwhelming data from Europe.Some underwhelming data from Europe.
Industrial production in the eurozone fell by 0.6% in June, slightly worse than the 0.5% decline analysts had been expecting. But it rose 2.6% on an annualised basis.Industrial production in the eurozone fell by 0.6% in June, slightly worse than the 0.5% decline analysts had been expecting. But it rose 2.6% on an annualised basis.
In the wider EU it fell by 0.5% but rose 2.8% year on year. This compares with a 1.2% rise in May for both areas.In the wider EU it fell by 0.5% but rose 2.8% year on year. This compares with a 1.2% rise in May for both areas.
The statistics office Eurostat said the decline was due to “production of capital goods falling by 1.9%, durable consumer goods by 1.2%, non-durable consumer goods by 0.4% and intermediate goods by 0.3%, while production of energy rose by 1.8% “The statistics office Eurostat said the decline was due to “production of capital goods falling by 1.9%, durable consumer goods by 1.2%, non-durable consumer goods by 0.4% and intermediate goods by 0.3%, while production of energy rose by 1.8% “
Eurozone industrial production MoM (June): -0.6% vs -0.5% expected, prior 1.2% (revised from 1.3%)Eurozone industrial production MoM (June): -0.6% vs -0.5% expected, prior 1.2% (revised from 1.3%)
Eurozone industrial production YoY (June): 2.6% vs 2.8% expected, prior 3.9% (revised from 4%).Eurozone industrial production YoY (June): 2.6% vs 2.8% expected, prior 3.9% (revised from 4%).
UpdatedUpdated
at 10.25am BSTat 10.25am BST
9.55am BST9.55am BST
09:5509:55
The positive Japanese data is good news for the country’s central bank, says Yann Quelenn at Swissquote Bank:The positive Japanese data is good news for the country’s central bank, says Yann Quelenn at Swissquote Bank:
Japan’s growth came in much higher than forecasted at 1% q/q versus 0.6% for the second quarter. Looking back, this release is the best data in the last two and a half years. It also represents the sixth consecutive quarter of positive GDP growth.Japan’s growth came in much higher than forecasted at 1% q/q versus 0.6% for the second quarter. Looking back, this release is the best data in the last two and a half years. It also represents the sixth consecutive quarter of positive GDP growth.
Consumer spending has largely improved and helped spur on the good data. Indeed, spending rose 0.9% from Q1 and beat the estimate of 0.5% for the quarter. Consumer spending has traditionally been the weakest point of the Japanese economy. This is maybe changing, but a string of data will be needed to confirm this trend.Consumer spending has largely improved and helped spur on the good data. Indeed, spending rose 0.9% from Q1 and beat the estimate of 0.5% for the quarter. Consumer spending has traditionally been the weakest point of the Japanese economy. This is maybe changing, but a string of data will be needed to confirm this trend.
Recent fundamentals are good news for the Bank of Japan, which is still the only major central bank not able to hint about further tightening. For the time being, good numbers must at some point translate into inflation. Nationwide inflation stands at 0.4% y/y – way below the inflation target of 2% – and this despite the country’s Abenomics policies and massive quantitative easing. The BoJ monetary policy still cannot be considered as a success. The only true gains have been in stock market, where the Nikkei 225 increased by 16% over the last 12 months.Recent fundamentals are good news for the Bank of Japan, which is still the only major central bank not able to hint about further tightening. For the time being, good numbers must at some point translate into inflation. Nationwide inflation stands at 0.4% y/y – way below the inflation target of 2% – and this despite the country’s Abenomics policies and massive quantitative easing. The BoJ monetary policy still cannot be considered as a success. The only true gains have been in stock market, where the Nikkei 225 increased by 16% over the last 12 months.
Currency-wise, the yen is weakening against the dollar and remains under pressure for further appreciation. Geopolitical tensions and market uncertainties may trigger a risk-off move towards yen again. This is the curse of being a safe haven.Currency-wise, the yen is weakening against the dollar and remains under pressure for further appreciation. Geopolitical tensions and market uncertainties may trigger a risk-off move towards yen again. This is the curse of being a safe haven.
9.24am BST9.24am BST
09:2409:24
However that does mean.....However that does mean.....
UK is set to lose status as world's 5th biggest economy in current quarter. £ weakness vs euro will relegate us to 6th behind France. pic.twitter.com/gZ1Q7p0FxuUK is set to lose status as world's 5th biggest economy in current quarter. £ weakness vs euro will relegate us to 6th behind France. pic.twitter.com/gZ1Q7p0Fxu
UpdatedUpdated
at 9.25am BSTat 9.25am BST
9.20am BST9.20am BST
09:2009:20
Back with the better than expected Japanese growth figures:Back with the better than expected Japanese growth figures:
Japan is top of the table for growth among G-7 countries https://t.co/LqQbntwoWh pic.twitter.com/905hUaeLHpJapan is top of the table for growth among G-7 countries https://t.co/LqQbntwoWh pic.twitter.com/905hUaeLHp
8.53am BST8.53am BST
08:5308:53
In another sign of the calmer mood at the start of the new week, the VIX volatility index has fallen back after last week hitting its highest level since President Trump was elected.In another sign of the calmer mood at the start of the new week, the VIX volatility index has fallen back after last week hitting its highest level since President Trump was elected.
Kit Juckes at Societe Generale said:Kit Juckes at Societe Generale said:
All is relatively calm, all is relatively quiet on the geopolitical front and long may that last. Markets are, as a result, trying to get back to biz-as-usual. Yields are slightly higher in bond-land, equity indices finding their feet, bitcoin making new highs seemingly ad infinitum.All is relatively calm, all is relatively quiet on the geopolitical front and long may that last. Markets are, as a result, trying to get back to biz-as-usual. Yields are slightly higher in bond-land, equity indices finding their feet, bitcoin making new highs seemingly ad infinitum.
UpdatedUpdated
at 8.54am BSTat 8.54am BST
8.28am BST8.28am BST
08:2808:28
Trump could struggle to meet economic targets - S&PTrump could struggle to meet economic targets - S&P
President Trump has problems everywhere - from the tensions with North Korea to the death of a woman at a weekend anti-racism rally - and his economic plans could also be in trouble.President Trump has problems everywhere - from the tensions with North Korea to the death of a woman at a weekend anti-racism rally - and his economic plans could also be in trouble.
That’s the view of S&P Global ratings, which says Trump could struggle to meet economic growth targets. In a new report it says:That’s the view of S&P Global ratings, which says Trump could struggle to meet economic growth targets. In a new report it says:
After the failure of the Republican plan to “repeal and replace” the Affordable Care Act, S&P Global Ratings believes the prospects for the administration to work with lawmakers to enact its promised pro-growth plans are, in a word, dim, said an article published today, titled “The Departed: Can U.S. Lawmakers Spur GDP Growth When They Return?.”After the failure of the Republican plan to “repeal and replace” the Affordable Care Act, S&P Global Ratings believes the prospects for the administration to work with lawmakers to enact its promised pro-growth plans are, in a word, dim, said an article published today, titled “The Departed: Can U.S. Lawmakers Spur GDP Growth When They Return?.”
“We no longer believe the federal government will be able to push through even a small infrastructure-spending package--much less the $1 trillion the White House has suggested,” said U.S. Chief Economist Beth Ann Bovino.“We no longer believe the federal government will be able to push through even a small infrastructure-spending package--much less the $1 trillion the White House has suggested,” said U.S. Chief Economist Beth Ann Bovino.
We still expect a small tax cut of $500 billion, rather than true tax reform, to be passed early next year as midterm elections approach. S&P global has argued that permanence is key to making tax reform effective, which would require bipartisan support.We still expect a small tax cut of $500 billion, rather than true tax reform, to be passed early next year as midterm elections approach. S&P global has argued that permanence is key to making tax reform effective, which would require bipartisan support.
“With U.S. economic growth stuck at around 2% and as the baby boomers retire, the administration’s plans to cut immigration would likely put the U.S. on the path to even slower rates of economic growth,” said Ms. Bovino.“With U.S. economic growth stuck at around 2% and as the baby boomers retire, the administration’s plans to cut immigration would likely put the U.S. on the path to even slower rates of economic growth,” said Ms. Bovino.
Hard-tariff policies could provoke a messy scenario in which the U.S.’s trade partners could retaliate in some way. But a limited restriction, which we think seems more likely at this point, may be more symbolic than a meaningful hit to aggregate flows. We expect the current expansionary period--now in its ninth year and the third-longest since World War II--to continue into 2018--with little help from Uncle Sam--albeit at a modest pace.Hard-tariff policies could provoke a messy scenario in which the U.S.’s trade partners could retaliate in some way. But a limited restriction, which we think seems more likely at this point, may be more symbolic than a meaningful hit to aggregate flows. We expect the current expansionary period--now in its ninth year and the third-longest since World War II--to continue into 2018--with little help from Uncle Sam--albeit at a modest pace.
8.13am BST8.13am BST
08:1308:13
European markets open higherEuropean markets open higher
As expected, shares are moving ahead in early trading as some of the volatility of the past week eases.As expected, shares are moving ahead in early trading as some of the volatility of the past week eases.
The FTSE 100 is up 0.25%, with Standard Life up 2% as it completes its merger with Aberdeen.The FTSE 100 is up 0.25%, with Standard Life up 2% as it completes its merger with Aberdeen.
France’s Cac has climbed 0.4%, Italy’s FTSE MIB is up 0.57% and Germany’s Dax has opened 0.7% better. Konstantinos Anthis at ADS Securities said:France’s Cac has climbed 0.4%, Italy’s FTSE MIB is up 0.57% and Germany’s Dax has opened 0.7% better. Konstantinos Anthis at ADS Securities said:
There is strong fundamental backing behind the major equity markets - with the low interest rates policies being the key catalyst - so stock traders will probably find the opportunity to re-establish their long bets at lower prices after the recent pullback.There is strong fundamental backing behind the major equity markets - with the low interest rates policies being the key catalyst - so stock traders will probably find the opportunity to re-establish their long bets at lower prices after the recent pullback.
7.52am BST7.52am BST
07:5207:52
The eurozone industrial production figures could show the effects of the recent strength of the euro. The single currency has benefitted from weakness elsewhere, particularly in the dollar, but this is causing a problem for the European Central Bank. President Mario Draghi is under pressure to begin easing the central bank’s quantitative easing and low interest rate policy, but a stronger euro makes that more tricky. Commenting on today’s expected data, Dave Madden at CMC Markets said:The eurozone industrial production figures could show the effects of the recent strength of the euro. The single currency has benefitted from weakness elsewhere, particularly in the dollar, but this is causing a problem for the European Central Bank. President Mario Draghi is under pressure to begin easing the central bank’s quantitative easing and low interest rate policy, but a stronger euro makes that more tricky. Commenting on today’s expected data, Dave Madden at CMC Markets said:
The consensus is for a reading of -0.4% and 2.9% on a month-on-month basis and on a year-on-year basis respectively. The relative strength of the euro is hitting the region, and traders want to see if that is still the case.The consensus is for a reading of -0.4% and 2.9% on a month-on-month basis and on a year-on-year basis respectively. The relative strength of the euro is hitting the region, and traders want to see if that is still the case.
7.48am BST7.48am BST
07:4807:48
The agenda: Japanese growth beats forecastsThe agenda: Japanese growth beats forecasts
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After last week’s market turmoil in the wake of growing tensions and belligerent rhetoric between North Korea and the US, the week looks like starting on a calmer note. As Kathleen Brooks at City Index put it:After last week’s market turmoil in the wake of growing tensions and belligerent rhetoric between North Korea and the US, the week looks like starting on a calmer note. As Kathleen Brooks at City Index put it:
The fact that we didn’t see an escalation in the rhetoric from either side over the weekend could be enough to trigger a recovery after last week’s risk selloff, and keep the markets focused on the economic fundamentals.The fact that we didn’t see an escalation in the rhetoric from either side over the weekend could be enough to trigger a recovery after last week’s risk selloff, and keep the markets focused on the economic fundamentals.
President Trump of course now has some rather pressing domestic concerns to deal with after a woman was killed at an anti-racism rally over the weekend.President Trump of course now has some rather pressing domestic concerns to deal with after a woman was killed at an anti-racism rally over the weekend.
As for the economic fundamentals, there has already been some positive news from Japan in the form of forecast-beating growth figures. The country’s second quarter GDP grew by 1% quarter on quarter or 4% in annualised terms, which was higher than the 2.5% expected. Economist Rob Carnell at ING Bank said:As for the economic fundamentals, there has already been some positive news from Japan in the form of forecast-beating growth figures. The country’s second quarter GDP grew by 1% quarter on quarter or 4% in annualised terms, which was higher than the 2.5% expected. Economist Rob Carnell at ING Bank said:
That makes Japan the fastest growing economy in the G7 this quarter by our reckoning and may re-start the chatter about the Bank of Japan’s eventual QQE [Qualitative Monetary Easing] exit strategy....That makes Japan the fastest growing economy in the G7 this quarter by our reckoning and may re-start the chatter about the Bank of Japan’s eventual QQE [Qualitative Monetary Easing] exit strategy....
This was not one of those flukey one-offs that was caused by a surge in inventories that will be worked down in coming quarters, or one of those random spikes caused by exports and imports growing out of synch.This was not one of those flukey one-offs that was caused by a surge in inventories that will be worked down in coming quarters, or one of those random spikes caused by exports and imports growing out of synch.
Although it is usually exactly the wrong thing to respond to volatile Japanese GDP data by revising full year forecasts, arithmetically, it is going to be hard for us to see only the 1.2% for 2017 we currently have pencilled in, and an upgrade now seems extremely likely.Although it is usually exactly the wrong thing to respond to volatile Japanese GDP data by revising full year forecasts, arithmetically, it is going to be hard for us to see only the 1.2% for 2017 we currently have pencilled in, and an upgrade now seems extremely likely.
Elsewhere Chinese retail sales and industrial production rose by 10.4% and 6.4% respectively in July, but this was slightly below analyst forecasts.Elsewhere Chinese retail sales and industrial production rose by 10.4% and 6.4% respectively in July, but this was slightly below analyst forecasts.
Even so the Nikkei 225 is up around 0.98% and the Hang Seng is 1.16% better, as investors focussed on the Japanese data. European markets are also forecast to open higher:Even so the Nikkei 225 is up around 0.98% and the Hang Seng is 1.16% better, as investors focussed on the Japanese data. European markets are also forecast to open higher:
Our European opening calls:$FTSE 7321 +0.15%$DAX 12044 +0.25%$CAC 5071 +0.20%$IBEX 10299 +0.16%$MIB 21420 +0.31%Our European opening calls:$FTSE 7321 +0.15%$DAX 12044 +0.25%$CAC 5071 +0.20%$IBEX 10299 +0.16%$MIB 21420 +0.31%
It is a thin day for economic data otherwise.It is a thin day for economic data otherwise.
The agenda:The agenda:
10 BST Eurozone Industrial Production figures10 BST Eurozone Industrial Production figures