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Eurozone GDP: Europe outpaces UK and US with strongest growth in a decade - business live Wall Street falls 1%; Europe outpaces UK and US with strongest growth in a decade - live
(35 minutes later)
The Dow Jones Industrial Average is now down 300 points, which puts it on course for its biggest one day fall since May last year.
Added to Monday’s 177 point decline, it would be the biggest two day points fall since June 2016 after Britain voted to leave the EU.
US consumer confidence remains strong, according to a new report from the Conference Board.
Its confidence index climbed to 125.4 in January from 1 revised figure of 123.1 in the previous month. Analysts had been expecting 123.1. (The survey was taken before this week’s decline on Wall Street of course.)
The decline on Wall Street has meant the falls in Europe have accelerated.
The FTSE 100 is now down nearly 1%, Germany’s Dax has dropped 0.9% and France’s Cac has fallen 0.8%. Trevor Greetham, head of multi asset at Royal London Asset Management, said:
Global stock markets dipped on Tuesday on concerns about rising US interest rates and high equity valuations.
This sell-off doesn’t come as a surprise. Investor sentiment has been getting very frothy, with our composite sentiment indicator hitting its highest reading since March 2017 this week.
The recent increase in share prices has been powered by the prospect of large corporate tax cuts in America so it’s noteworthy that US company directors have started to sell shares in their own companies in large numbers.
With expectations running high, we think the sell-off may have further to run and we reduced our exposure to equities in our multi asset funds yesterday, although we still remain overweight stocks.
With the world economy strong and interest rates low, we would probably buy a more pronounced dip.
The worst performer in the Dow is, unsurprisingly, United Healthcare:
Of the 230 point current drop on the Dow Industrials so far in early trade, ~ 85 pts of it is just UnitedHealth $UNH on heels of Amazon, Berkshire & JPMorganChase headlines on healthcarehttps://t.co/CB4e48e7D3
And here’s our report on the new healthcare partnership causing all the fuss:
US markets have come under renewed pressure, as investors face the prospect of rising interest rates and the withdrawal of central banks’ bond buying programmes.US markets have come under renewed pressure, as investors face the prospect of rising interest rates and the withdrawal of central banks’ bond buying programmes.
With bond prices falling ahead of the latest Federal Reserve decision (no move is expected yet but there is a growing expectation of at least three more rises this year) the Dow Jones Industrial Average has fallen 230 points or 0.9% in early trading.With bond prices falling ahead of the latest Federal Reserve decision (no move is expected yet but there is a growing expectation of at least three more rises this year) the Dow Jones Industrial Average has fallen 230 points or 0.9% in early trading.
After Monday’s 177 point fall, that would mark the first two day decline since December. But bear in mind, US markets had hit new peaks as recently as Friday.After Monday’s 177 point fall, that would mark the first two day decline since December. But bear in mind, US markets had hit new peaks as recently as Friday.
Meanwhile the S&P 500 opened 0.8% lower and the Nasdaq Composite fell just over 1%. Neil Wilson, senior market analyst at ETX Capital, said:Meanwhile the S&P 500 opened 0.8% lower and the Nasdaq Composite fell just over 1%. Neil Wilson, senior market analyst at ETX Capital, said:
The rise in global sovereign bond yields has unsettled investors and hit riskier assets. US 10s are holding above 2.7%, while the 30-year T note is approaching 3%.The rise in global sovereign bond yields has unsettled investors and hit riskier assets. US 10s are holding above 2.7%, while the 30-year T note is approaching 3%.
Certainly the dynamics have shifted in bond markets. Central banks are either out of the market or buying fewer bonds. The Fed is now in the business of selling not buying. The ECB seems to be teeing up a short taper that could see QE end in September, which is a shade earlier than most anticipated back in December. The BoJ is also tilting towards normalisation, albeit much more slowly.Certainly the dynamics have shifted in bond markets. Central banks are either out of the market or buying fewer bonds. The Fed is now in the business of selling not buying. The ECB seems to be teeing up a short taper that could see QE end in September, which is a shade earlier than most anticipated back in December. The BoJ is also tilting towards normalisation, albeit much more slowly.
Earlier this week Goldman Sachs warned of a possible market correction.Earlier this week Goldman Sachs warned of a possible market correction.
“Whatever the trigger, a correction of some kind seems a high probability in the coming months,” said Peter Oppenheimer, the bank’s chief global equity strategist. “[But] the continuation of low core inflation and easy monetary policy suggests that a correction is more likely than a bear market.”“Whatever the trigger, a correction of some kind seems a high probability in the coming months,” said Peter Oppenheimer, the bank’s chief global equity strategist. “[But] the continuation of low core inflation and easy monetary policy suggests that a correction is more likely than a bear market.”
A sharp decline in healthcare stocks is also hitting the market today, after Amazon, Warren Buffett and JP Morgan teamed up to form their own healthcare partnership.A sharp decline in healthcare stocks is also hitting the market today, after Amazon, Warren Buffett and JP Morgan teamed up to form their own healthcare partnership.
Ahead of Wall Street opening, Lukman Otunuga, research analyst at FXTM, said:Ahead of Wall Street opening, Lukman Otunuga, research analyst at FXTM, said:
Global equity bulls failed to make an appearance during Tuesday’s trading session as higher U.S. bond yields and caution ahead of the Federal Reserve meeting weighed heavily on sentiment.Global equity bulls failed to make an appearance during Tuesday’s trading session as higher U.S. bond yields and caution ahead of the Federal Reserve meeting weighed heavily on sentiment.
World shares were under renewed selling pressure today with Asian shares tumbling lower during early trade, following Wall Street’s steep declines overnight. In Europe, equities tumbled amid the lack of appetite for risk. With Wall Street suffering its largest drop in more than four months on Monday, U.S. stocks could remain pressured by the negative sentiment this afternoon.World shares were under renewed selling pressure today with Asian shares tumbling lower during early trade, following Wall Street’s steep declines overnight. In Europe, equities tumbled amid the lack of appetite for risk. With Wall Street suffering its largest drop in more than four months on Monday, U.S. stocks could remain pressured by the negative sentiment this afternoon.
#Dow futures needs to hold this support to prevent an even deeper fall. Looks heavy in this time frame. overshoot quite likely even if index ultimately recoups ^KO pic.twitter.com/NNqFMqvzUe#Dow futures needs to hold this support to prevent an even deeper fall. Looks heavy in this time frame. overshoot quite likely even if index ultimately recoups ^KO pic.twitter.com/NNqFMqvzUe
The eurozone has posted its strongest growth in a decade. The region grew by 2.5% last year, the best performance since the financial crisis.The eurozone has posted its strongest growth in a decade. The region grew by 2.5% last year, the best performance since the financial crisis.
Economists think Europe is going to have another good year.Economists think Europe is going to have another good year.
France and Spain led the way. France racked up its fastest growth since 2011, thanks to stronger business spending, while Spain notched up another year of 3%+ growth.France and Spain led the way. France racked up its fastest growth since 2011, thanks to stronger business spending, while Spain notched up another year of 3%+ growth.
But in the UK, new figures show that consumers racked up more credit last month. Mortgage approvals fell to a near three-year low.But in the UK, new figures show that consumers racked up more credit last month. Mortgage approvals fell to a near three-year low.
Over in America, Amazon is piling into the health market in partnership with JP Morgan and Berkshire Hathaway. Shares in healthcare firms are down heavily in pre-market trading.Over in America, Amazon is piling into the health market in partnership with JP Morgan and Berkshire Hathaway. Shares in healthcare firms are down heavily in pre-market trading.
European markets in the red, amid speculation that shares could be heading for a correction. It’s going to get worse when Wall Street opens in half an hour...European markets in the red, amid speculation that shares could be heading for a correction. It’s going to get worse when Wall Street opens in half an hour...
The futures selloff is gathering a little steam https://t.co/7HBgVXvoLF pic.twitter.com/ncjc6KGG0xThe futures selloff is gathering a little steam https://t.co/7HBgVXvoLF pic.twitter.com/ncjc6KGG0x
PwC also made this chart, showing how the eurozone outperformed other major economies last year:PwC also made this chart, showing how the eurozone outperformed other major economies last year:
Getting back to the eurozone growth figures...Barret Kupelian, senior economist at PwC, says:Getting back to the eurozone growth figures...Barret Kupelian, senior economist at PwC, says:
“The good news keeps on coming from the Eurozone, which grew at a quarterly rate of 0.6% in the last quarter of 2017. Even though this is slightly slower than the previous quarter, the fuller picture for 2017 is overwhelmingly positive, with growth in the Eurozone ahead of the UK, US and Japan.“The good news keeps on coming from the Eurozone, which grew at a quarterly rate of 0.6% in the last quarter of 2017. Even though this is slightly slower than the previous quarter, the fuller picture for 2017 is overwhelmingly positive, with growth in the Eurozone ahead of the UK, US and Japan.
“Taking a more historical look at the growth track record of large advanced economies, the Eurozone can now boast holding the title of the fastest growing large advanced economy four times since the financial crisis compared to three times for the US and the UK and once for Japan.“Taking a more historical look at the growth track record of large advanced economies, the Eurozone can now boast holding the title of the fastest growing large advanced economy four times since the financial crisis compared to three times for the US and the UK and once for Japan.
PwC also expect the eurozone to do well in 2018, unless any ‘major unexpected shocks’ hit the global economy.PwC also expect the eurozone to do well in 2018, unless any ‘major unexpected shocks’ hit the global economy.
Kupelian says:Kupelian says:
In our main scenario projection, we expect the Eurozone to grow by at least 2%, marking its strongest two-year streak since the global financial crisis.”In our main scenario projection, we expect the Eurozone to grow by at least 2%, marking its strongest two-year streak since the global financial crisis.”
More here.More here.
Economists are continuing to welcome today’s French GDP figures, which showed a strong pick-up in business investment.Economists are continuing to welcome today’s French GDP figures, which showed a strong pick-up in business investment.
This is from Emily Mansfield of the Economist Intelligence Unit (GFCF = gross fixed capital formation, or the purchase of new assets)This is from Emily Mansfield of the Economist Intelligence Unit (GFCF = gross fixed capital formation, or the purchase of new assets)
French Q4 GDP numbers are out, and show that GFCF has finally surpassed its 2008 level, after lagging the recovery in the rest of the economy pic.twitter.com/ni6Jb6GBlsFrench Q4 GDP numbers are out, and show that GFCF has finally surpassed its 2008 level, after lagging the recovery in the rest of the economy pic.twitter.com/ni6Jb6GBls
Nikolay Markov, senior economist at Pictet Asset Management, hopes this trend will continue:Nikolay Markov, senior economist at Pictet Asset Management, hopes this trend will continue:
#French Q4 2017 real GDP growth came stronger led by business investment and net exports. We expect GDP growth to continue improving in 2018 supported by strong investment sentiment. pic.twitter.com/E9mHp4bCvw#French Q4 2017 real GDP growth came stronger led by business investment and net exports. We expect GDP growth to continue improving in 2018 supported by strong investment sentiment. pic.twitter.com/E9mHp4bCvw
The selloff continues! Wall Street is heading for a second day of losses, as heathcare companies are hit by the surprise arrival of Amazon in their sector...The selloff continues! Wall Street is heading for a second day of losses, as heathcare companies are hit by the surprise arrival of Amazon in their sector...
Are stocks ready to make it two losing sessions in a row? DJIA futures now down over 200 points, with Amazon/Berkshire/JPM deal piling on the pain for healthcare stocks. https://t.co/1uYrJWATOZ pic.twitter.com/2j5O0DiPn5Are stocks ready to make it two losing sessions in a row? DJIA futures now down over 200 points, with Amazon/Berkshire/JPM deal piling on the pain for healthcare stocks. https://t.co/1uYrJWATOZ pic.twitter.com/2j5O0DiPn5
Investors in US healthcare firms may need a lie-down, possibly with a cold flannel....Investors in US healthcare firms may need a lie-down, possibly with a cold flannel....
Absolute bloodbath in insurance and pharmacy stocks in premarket after #Amazon, Berkshire, JPMorgan announce plans to start a healthcare company https://t.co/fEBbqaaBpl pic.twitter.com/C6uNyeqFtaAbsolute bloodbath in insurance and pharmacy stocks in premarket after #Amazon, Berkshire, JPMorgan announce plans to start a healthcare company https://t.co/fEBbqaaBpl pic.twitter.com/C6uNyeqFta
In other news....retail giant Amazon, Warren Buffett’s Berkshire Hathaway and Wall Street titan JPMorgan have announced a curious tie-up.In other news....retail giant Amazon, Warren Buffett’s Berkshire Hathaway and Wall Street titan JPMorgan have announced a curious tie-up.
The three companies are going to create a not-for-profit company to give their own staff high-quality and transparent healthcare.The three companies are going to create a not-for-profit company to give their own staff high-quality and transparent healthcare.
Veteran investor Warren Buffett suggests the trio are keen to shake up the way healthcare is provided in America.Veteran investor Warren Buffett suggests the trio are keen to shake up the way healthcare is provided in America.
Buffett says:Buffett says:
“The ballooning costs of healthcare act as a hungry tapeworm on the American economy.“The ballooning costs of healthcare act as a hungry tapeworm on the American economy.
Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”
JUST IN: UnitedHealth shares down 4.2 percent premarket after Amazon, Berkshire Hathaway, JPMorgan to partner on healthcare. $UNH pic.twitter.com/Yks5QH05nFJUST IN: UnitedHealth shares down 4.2 percent premarket after Amazon, Berkshire Hathaway, JPMorgan to partner on healthcare. $UNH pic.twitter.com/Yks5QH05nF
Pan Pylas of Associated Press has a good take on today’s growth figures:
The eurozone economy, for so long a source of uncertainty, has enjoyed its best year in a decade, clear evidence it has broken out of its prolonged and acute debt crisis that raised fears about the very survival of the euro currency.
In its first estimate for the fourth quarter, Eurostat, the European Union’s statistics agency, said Tuesday that the eurozone expanded by 0.6 percent in the October-December period from the three months before.
That more-than-healthy level of growth means that for the whole of 2017, the eurozone economy expanded by 2.5 percent, its best performance since 2007, when it grew 3 percent. The eurozone even grew faster than the U.S., which expanded by 2.3 percent.
In the decade since 2007, the eurozone has had to grapple with one crisis after another, starting with the financial crash of 2008 that prompted the deepest worldwide recession since World War II. That exposed the weak underbelly of the eurozone the state of the public finances in a number of member economies.
Four countries Greece, Ireland, Portugal and Cyprus had to be bailed out by their partners in the eurozone and the International Monetary Fund, and in return they made deep budget cuts to get their public finances into shape, hitting their economies hard.
The Greek economy, for example, shed around a quarter of its output, and saw unemployment and poverty levels ratchet higher.
It’s only recently that fears of a eurozone break-up have eased. Greece, notably, is set to emerge from its bailout era this summer, eight years after it first faced potential bankruptcy.
Another chart showing how the eurozone outpaced its major rivals last year:
The Eurozone rules! #GDP pic.twitter.com/bJ40RGIzFD
ING’s Bert Colijn is also impressed that the eurozone grew by 2.5% during 2017.
He writes:
Economic growth has shifted to a substantially faster growth path over the course of 2017, and current GDP data confirms that. Eurozone growth for 2017 as a whole was stronger than many advanced markets, like the US and UK for example.
While detailed breakdowns have yet to be released, it seems that the Eurozone economy continues to fire on all cylinders. Investment has yet to recover from the crisis fully but has been an essential contributor to growth during the year.
However, Colijn is also concerned that the strong euro could hold back growth in 2018 (as exports will be less competitive)
Eurozone GDP rounds up a very strong year, but ING's @BertColijn says the big question is if the strong euro will offset the effects of improving external demandhttps://t.co/tGa3DZmJCI
Analysts at Ulster Bank are hopeful that the eurozone will continue to grow robustly in 2018.
Eurozone GDP rose 0.6% q/q in Q4 (in line with consenus) following 0.7% in both Q3 and Q2 - consistent with a very strong 2.5% in 2017 as a whole following 1.8% in 2016, while the latest data suggest that very positive momentum is being sustained in the early stages of 2018 pic.twitter.com/moMAUanyUO
Jacob Deppe, Head of Trading at online trading platform, Infinox, is impressed by Europe’s growth last year:
“Anything the US economy can do the Eurozone economy can do, slightly better it seems.
“This is the best economic growth the Eurozone has seen since before the Global Financial Crisis.
“Where we go from here is anyone’s guess. But with both the US and Eurozone growing in tandem and with Asian economies on a roll, the hope is that 2018 delivers continued growth, further confidence and economic stability for the first time in a decade.
“There remain issues on the horizon. Unemployment in the Eurozone, while falling, is still too high, particularly among the young.
We now have confirmation that Europe and America both grew much faster than Britain last year.
Economists Rupert Seggins has tweeted a handy chart:
Economic growth in 2017 (Q4/Q4 % change):UK: 1.5%US: 2.5%Euro Area: 2.7% pic.twitter.com/86zcfYdZpA
Aila Mihr of Danske Bank says Europe’s economy is expanding strongly:
🇪🇺Solid expansion continues: Q4 17 #eurozone #growth at 0.6% q/q, leaving 2017 annual euro area GDP growth at 2.5%, highest since 2007. No contribution breakdown yet, but slowdown in Q4 potentially due to lower positive contribution from net exports due to #EUR headwind. pic.twitter.com/Cj4BR7lGLi
NEWSFLASH: The eurozone and the wider EU have both posted their strongest annual growth since the financial crisis.
New GDP figures from Eurostat confirm that the European recovery remains on track, with annual growth of 2.5% during 2017 in the EU and the narrower single currency block. That’s the strongest annual growth in a decade.
In comparison, the UK grew by around 1.8% during 2017 (according to figures released last week)
Eurostat also reports that the eurozone and the EU both grew by 0.6% in the final three months of 2017, partly thanks to France’s 0.6% growth and Spain’s 0.7%.
Compared to Q4 2016, seasonally adjusted GDP rose by 2.7% in the euro area and by 2.6% in the EU28.
In another boost, Eurozone and EU growth in the third quarter of last year has been revised up, from +0.6% to +0.7%.
There may be some celebrations in Brussels as this data filters through. Three years ago, the eurozone was being rocked by the Greek debt crisis. Now, the region is looking calmer and more secure, despite Brexit.
Over in Frankfurt, the European Central Bank might feel vindicated after launching a massive stimulus programme to ward off deflation, drive down unemployment and keep the economy growing.
Economists are concerned by the rise in UK consumer borrowing:
The UK unsecured credit boom which we have been assured is slowing in fact accelerated to an annual rate of 9.5% in December #BoE
Food for thought for the @bankofengland MPC next week. Mortgage approvals lowest since Jan 2015, but unsecured consumer credit reverses recent slowdown with £1.52bn of new borrowing in December (+9.5% YoY). V difficult balancing act for UK policymakers pic.twitter.com/wOQ5ct62q4
Breaking; The number of new mortgages approved in Britain has hit its lowest in almost three years.
Just 61,039 mortgages were signed off in December, a drop of over 3,000 compared to November. That’s the smallest number since January 2015.
#UnitedKingdom Mortgage Approvals at 61.04K https://t.co/xjNGJUUXea pic.twitter.com/cYefMMRst2
Bank of England figures also show that UK consumers borrowed an extra £1.5bn on credit last month.
That pushed the annual growth in credit to 9.5%, up from 9.3%.
So, people are finding it harder to buy a new house, and borrowing more on credit to make ends meet. Not a good sign for the UK economy in 2018.
Poland’s economy accelerated last year, according to new data.
Poland’s GDP expanded by 4.6% in 2017, up from 2.9% in 2016.