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| Turkish crisis: Indian rupee hits record low but lira recovers - business live | Turkish crisis: Indian rupee hits record low but lira recovers - business live |
| (35 minutes later) | |
| These charts show the divide in Britain’s labour market, with unemployment at a 43-year low, but wage growth decidedly underwhelming: | |
| Newsflash: Britain’s unemployment rate has hit a new 43-year low. | Newsflash: Britain’s unemployment rate has hit a new 43-year low. |
| The UK’s jobless rate dropped to just 4.0% in April-June 2018, down from 4.2% previously. That’s the lowest level since the winter of 1975, when Harold Wilson was prime minister. | The UK’s jobless rate dropped to just 4.0% in April-June 2018, down from 4.2% previously. That’s the lowest level since the winter of 1975, when Harold Wilson was prime minister. |
| In April to June 2018, the unemployment rate was 4.0% – it’s not been lower since December 1974 to February 1975 https://t.co/tQdXLhXhhx pic.twitter.com/ffPaFsAZId | In April to June 2018, the unemployment rate was 4.0% – it’s not been lower since December 1974 to February 1975 https://t.co/tQdXLhXhhx pic.twitter.com/ffPaFsAZId |
| The Office for National Statistics reports that the number of people in work rose, while those out of work fell. | The Office for National Statistics reports that the number of people in work rose, while those out of work fell. |
| However, the number of people dropping out of Britain’s labour force also rose, and more people became self-employed. | However, the number of people dropping out of Britain’s labour force also rose, and more people became self-employed. |
| Here’s the details: | Here’s the details: |
| The number of people in employment increased by 42,000 on the quarter to 32.39 million in the second quarter of 2018. | The number of people in employment increased by 42,000 on the quarter to 32.39 million in the second quarter of 2018. |
| Unemployment declined by 65,000 on the quarter to 1.36 million. | Unemployment declined by 65,000 on the quarter to 1.36 million. |
| The level of inactivity increased by 77,000 on the quarter, resulting in the inactivity rate increasing to 21.2%. | The level of inactivity increased by 77,000 on the quarter, resulting in the inactivity rate increasing to 21.2%. |
| The number of self-employed people increased by 22,000 on the quarter to 4.77 million in the second quarter of 2018. | The number of self-employed people increased by 22,000 on the quarter to 4.77 million in the second quarter of 2018. |
| However, people aren’t feeling the benefits in their pay packets. Total earnings (including bonuses) only rose by 2.4% per year during the quarter, down from 2.5%. | However, people aren’t feeling the benefits in their pay packets. Total earnings (including bonuses) only rose by 2.4% per year during the quarter, down from 2.5%. |
| Germany has beaten expectations by growing by 0.5% in the second quarter of 2018. | Germany has beaten expectations by growing by 0.5% in the second quarter of 2018. |
| The eurozone’s largest economy benefitted from stronger domestic demand from households and companies. | The eurozone’s largest economy benefitted from stronger domestic demand from households and companies. |
| Statistics body Destatis also reports that German exports rose during the quarter, while imports increased at an “even stronger” pace. | Statistics body Destatis also reports that German exports rose during the quarter, while imports increased at an “even stronger” pace. |
| Germany has outpaced the UK over the the last quarter (UK GDP rose by 0.4%), and was rather faster than France’s 0.2% expansion. | Germany has outpaced the UK over the the last quarter (UK GDP rose by 0.4%), and was rather faster than France’s 0.2% expansion. |
| German growth in the first quarter of 2018 was also revised higher, from 0.3% to 0.4%. | German growth in the first quarter of 2018 was also revised higher, from 0.3% to 0.4%. |
| Teis Knuthsen of Denmark’s Kirk Kapital points out that Germany has now been growing for four years in a row: | Teis Knuthsen of Denmark’s Kirk Kapital points out that Germany has now been growing for four years in a row: |
| The German economy grew by 0.5% q/q in Q2, better than expected, and the 16th consecutive rise. Germany is on track for its longest expansion on record. pic.twitter.com/I7bIKeec0o | The German economy grew by 0.5% q/q in Q2, better than expected, and the 16th consecutive rise. Germany is on track for its longest expansion on record. pic.twitter.com/I7bIKeec0o |
| However, economist Ulrik Bie thinks Germany could still falter in the months ahead, as Turkey’s crisis and the US-China trade wars bite. | However, economist Ulrik Bie thinks Germany could still falter in the months ahead, as Turkey’s crisis and the US-China trade wars bite. |
| GDP grew by 0.5% in Q2 bringing down annual growth to 2.0%. With headwinds from trade, Italy, Turkey, higher inflation, and continued frugality in households, GDP-growth could disappoint in coming quarters #macrobond #germany pic.twitter.com/wg1DyWVVH1 | GDP grew by 0.5% in Q2 bringing down annual growth to 2.0%. With headwinds from trade, Italy, Turkey, higher inflation, and continued frugality in households, GDP-growth could disappoint in coming quarters #macrobond #germany pic.twitter.com/wg1DyWVVH1 |
| Despite the rupee’s slide, the picture is brighter in other emerging markets this morning. | Despite the rupee’s slide, the picture is brighter in other emerging markets this morning. |
| South Africa’s rand has gained 2%, as it bounces back after hitting a two-year low during Monday’s selloff . | South Africa’s rand has gained 2%, as it bounces back after hitting a two-year low during Monday’s selloff . |
| Russia’s rouble is up 1.5%, reaching 66.76 to the US dollar having struck 68 (also a two-year low) on Monday. | Russia’s rouble is up 1.5%, reaching 66.76 to the US dollar having struck 68 (also a two-year low) on Monday. |
| The Mexican peso is also catching a break, up 1% too. | The Mexican peso is also catching a break, up 1% too. |
| Turkey’s stock market is also rallying this morning, up over 2% in early trading. | Turkey’s stock market is also rallying this morning, up over 2% in early trading. |
| That mean shares have clawed back most of Monday’s losses. | That mean shares have clawed back most of Monday’s losses. |
| After days of very heavy losses, Turkey’s currency is recovering some ground. | After days of very heavy losses, Turkey’s currency is recovering some ground. |
| The lira has risen by around 5%, taking it back to 6.5 lira to the US dollar from over 6.88 late last night. | The lira has risen by around 5%, taking it back to 6.5 lira to the US dollar from over 6.88 late last night. |
| That could be a sign that investors are recovering their nerve - however, this still leaves the lira in a precarious place (it was worth 3.7 lira to the dollar at the start of 2018). | That could be a sign that investors are recovering their nerve - however, this still leaves the lira in a precarious place (it was worth 3.7 lira to the dollar at the start of 2018). |
| Look who is 'up' today! #TRY #Lira pic.twitter.com/YddPsaY89V | Look who is 'up' today! #TRY #Lira pic.twitter.com/YddPsaY89V |
| India shares another problem with Turkey, and indeed with all emerging markets -- the strengthening US dollar. | India shares another problem with Turkey, and indeed with all emerging markets -- the strengthening US dollar. |
| As America’s central bank, the Federal Reserve continues to raise interest rates, capital is being sucked out of developing markets and back to the US (because dollars offer a higher rate of return). | As America’s central bank, the Federal Reserve continues to raise interest rates, capital is being sucked out of developing markets and back to the US (because dollars offer a higher rate of return). |
| That weakens EM currencies, putting pressure on their central banks to raise interest rates too -- which undermines growth. | That weakens EM currencies, putting pressure on their central banks to raise interest rates too -- which undermines growth. |
| Hussein Sayed, chief market strategist at FXTM, says: | Hussein Sayed, chief market strategist at FXTM, says: |
| Economies with large current account deficits such as India, Argentina and South Africa will come under increased economic pressure as the Fed continues to tighten monetary policy. | Economies with large current account deficits such as India, Argentina and South Africa will come under increased economic pressure as the Fed continues to tighten monetary policy. |
| The rupee’s woes are a sign that emerging market contagion is worsening, says Neil Wilson of Markets.com: | The rupee’s woes are a sign that emerging market contagion is worsening, says Neil Wilson of Markets.com: |
| India’s rupee slipped to a record low against the dollar, with one USD buying 70 rupees at one point this morning. | India’s rupee slipped to a record low against the dollar, with one USD buying 70 rupees at one point this morning. |
| This follows the chaos in the Argentine peso market on Monday as the currency plumbed fresh depths even as the central bank raised interest rates by 5 percentage points to 45%. | This follows the chaos in the Argentine peso market on Monday as the currency plumbed fresh depths even as the central bank raised interest rates by 5 percentage points to 45%. |
| The rand is coming off its lows but the pressure across the board is there to see. | The rand is coming off its lows but the pressure across the board is there to see. |
| The Financial Times says the rupee is suffering from investors’ concerns about India’s lack of progress in fiscal consolidation and the country’s widening current account deficit. | The Financial Times says the rupee is suffering from investors’ concerns about India’s lack of progress in fiscal consolidation and the country’s widening current account deficit. |
| That sounds rather similar to Turkey’s problems (without the diplomatic row with America, of course) | That sounds rather similar to Turkey’s problems (without the diplomatic row with America, of course) |
| Overnight, America has warned Turkey that it won’t end the diplomatic row between the two countries until US pastor Andrew Brunson is released from house arrest. | Overnight, America has warned Turkey that it won’t end the diplomatic row between the two countries until US pastor Andrew Brunson is released from house arrest. |
| White House National Security Adviser John Bolton met Turkey’s ambassador to the US, Serdar Kilic, yesterday and insisted that Brunson -- who was arrested in 2016 and charged with espionage -- must be freed. | White House National Security Adviser John Bolton met Turkey’s ambassador to the US, Serdar Kilic, yesterday and insisted that Brunson -- who was arrested in 2016 and charged with espionage -- must be freed. |
| Bloomberg explains: | Bloomberg explains: |
| President Donald Trump’s top national security aide warned Turkey’s ambassador on Monday that the U.S. has nothing further to negotiate until a detained American pastor is freed, according to two people familiar with the matter, signaling a standoff between the countries will continue as Turkey’s financial meltdown spreads to emerging markets. | President Donald Trump’s top national security aide warned Turkey’s ambassador on Monday that the U.S. has nothing further to negotiate until a detained American pastor is freed, according to two people familiar with the matter, signaling a standoff between the countries will continue as Turkey’s financial meltdown spreads to emerging markets. |
| More here. | More here. |
| Last night, my colleague Martin Chulov reported that a misunderstanding between Donald Trump and Recep Tayyip Erdoğan over Brunson, and a Turkish woman detained in Israel, may have helped caused the crisis. | Last night, my colleague Martin Chulov reported that a misunderstanding between Donald Trump and Recep Tayyip Erdoğan over Brunson, and a Turkish woman detained in Israel, may have helped caused the crisis. |
| The Indian government is urging people not to panic about the rupee’s slide to a record low this morning. | The Indian government is urging people not to panic about the rupee’s slide to a record low this morning. |
| Subhash Chander Garg, economic affairs secretary at the ministry of finance, has blame the move on ‘external factors’ (a reference to the Turkish crisis, I think), adding that there is no need to worry. | Subhash Chander Garg, economic affairs secretary at the ministry of finance, has blame the move on ‘external factors’ (a reference to the Turkish crisis, I think), adding that there is no need to worry. |
| Newsflash: India’s rupee has fallen to a record low, as Turkey’s currency woes sends ripples through emerging markets. | Newsflash: India’s rupee has fallen to a record low, as Turkey’s currency woes sends ripples through emerging markets. |
| The rupee fell to 70.09 to the US dollar on Tuesday morning, as investors fretted that the lira crisis will spread to other developing nations. The slide means the rupee has lost a tenth of its value so far this year. | The rupee fell to 70.09 to the US dollar on Tuesday morning, as investors fretted that the lira crisis will spread to other developing nations. The slide means the rupee has lost a tenth of its value so far this year. |
| Traders in Mumbai report that the Indian central bank may have stepped in to stabilise the currency after it fell through the 70-point mark for the first time over. | Traders in Mumbai report that the Indian central bank may have stepped in to stabilise the currency after it fell through the 70-point mark for the first time over. |
| N. S. Venkatesh, chief executive of the Association of Mutual Funds in India, told the AFP newswire that: | N. S. Venkatesh, chief executive of the Association of Mutual Funds in India, told the AFP newswire that: |
| “Investors are concerned that the rupee has crossed the 70 benchmark today.... | “Investors are concerned that the rupee has crossed the 70 benchmark today.... |
| The Reserve Bank of India’s monetary policy has shown concern for the rupee’s fluctuations so investors should not be worried by knee-jerk reactions in the forex market.” | The Reserve Bank of India’s monetary policy has shown concern for the rupee’s fluctuations so investors should not be worried by knee-jerk reactions in the forex market.” |
| Turkey's lira is relatively stable after slumping 20% in 4 days, but India's rupee hits record low https://t.co/SyWjEvAUD1 pic.twitter.com/sSKVyGycCM | Turkey's lira is relatively stable after slumping 20% in 4 days, but India's rupee hits record low https://t.co/SyWjEvAUD1 pic.twitter.com/sSKVyGycCM |
| 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. |
| Turkey is in the eye of the storm today thanks to the currency crisis that has wiped a third off the lira’s value in the last week. | Turkey is in the eye of the storm today thanks to the currency crisis that has wiped a third off the lira’s value in the last week. |
| As we covered yesterday, the Turkish crisis gave other emerging markets a jolt yesterday - forcing Argentina to hike its interest rates to 45% after the peso hit an all-time low. | As we covered yesterday, the Turkish crisis gave other emerging markets a jolt yesterday - forcing Argentina to hike its interest rates to 45% after the peso hit an all-time low. |
| President Recep Tayyip Erdoğan refused to bow to pressure from the markets yesterday. Instead, he hit out at the US for imposing sanctions in an attempt to force Turkey to release an American pastor named Andrew Brunson, who is currently under house arrest. | President Recep Tayyip Erdoğan refused to bow to pressure from the markets yesterday. Instead, he hit out at the US for imposing sanctions in an attempt to force Turkey to release an American pastor named Andrew Brunson, who is currently under house arrest. |
| He declared: | He declared: |
| “We are together in NATO and then you stab your strategic partner in the back.” | “We are together in NATO and then you stab your strategic partner in the back.” |
| Tuesday’s GUARDIAN: “Fears of global crisis as Turkey battles to halt sliding currency” #bbcpapers #tomorrowspaperstoday pic.twitter.com/Jg70iPtQ11 | Tuesday’s GUARDIAN: “Fears of global crisis as Turkey battles to halt sliding currency” #bbcpapers #tomorrowspaperstoday pic.twitter.com/Jg70iPtQ11 |
| Currently the lira is bobbing around 6.8 to the US dollar, close to Monday’s all-time low of 7.2. Turkey’s central bank seems to have calmed the crisis a little, by pledging yesterday to provide liquidity to its banking sector. | Currently the lira is bobbing around 6.8 to the US dollar, close to Monday’s all-time low of 7.2. Turkey’s central bank seems to have calmed the crisis a little, by pledging yesterday to provide liquidity to its banking sector. |
| But worries over Turkey are mounting; its inflation rate is pushes higher, its current account deficit is worryingly high, and its companies may struggle to repay loans taken out in US dollars. | But worries over Turkey are mounting; its inflation rate is pushes higher, its current account deficit is worryingly high, and its companies may struggle to repay loans taken out in US dollars. |
| The markets remain unconvinced that Erdoğan’s government can cope with the currency crisis, triggered by the diplomatic spat with Washington that has resulted in higher U.S. tariffs. | The markets remain unconvinced that Erdoğan’s government can cope with the currency crisis, triggered by the diplomatic spat with Washington that has resulted in higher U.S. tariffs. |
| Many economists argue that Turkey urgently needs a big rate hike, something Erdogan has opposed in the past. | Many economists argue that Turkey urgently needs a big rate hike, something Erdogan has opposed in the past. |
| European stock markets are expected to open higher, having been dragged down by Turkish worries on Monday. | European stock markets are expected to open higher, having been dragged down by Turkish worries on Monday. |
| Jasper Lawler of London Capital Group says investors will be watching emerging markets today. | Jasper Lawler of London Capital Group says investors will be watching emerging markets today. |
| The selloff in the Turkish Lira and the knock-on effects to other currencies and asset classes will continue to attract attention through today’s session. | The selloff in the Turkish Lira and the knock-on effects to other currencies and asset classes will continue to attract attention through today’s session. |
| Also coming up today | Also coming up today |
| New UK unemployment data is expected to show that Britain’s jobless rate stuck at 4.2%, the lowest in over 40 years. That’s the good news. The bad news is that wage growth probably remains weak, with basic pay expected to only rise by 2.7% year-on-year. | New UK unemployment data is expected to show that Britain’s jobless rate stuck at 4.2%, the lowest in over 40 years. That’s the good news. The bad news is that wage growth probably remains weak, with basic pay expected to only rise by 2.7% year-on-year. |
| We also get a new estimate of eurozone growth in the last quarter; it will probably confirm that the region’s economy expanded by just 0.3% in April-June. | We also get a new estimate of eurozone growth in the last quarter; it will probably confirm that the region’s economy expanded by just 0.3% in April-June. |
| The agenda: | The agenda: |
| 7am BST: German GDP for Q2 2018 | 7am BST: German GDP for Q2 2018 |
| 9.30am BST: UK unemployment data | 9.30am BST: UK unemployment data |
| 10am BST: Eurozone GDP for Q2 2018 | 10am BST: Eurozone GDP for Q2 2018 |