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UK car sales tumble 20%; markets hit by bond sell-off – as it happened UK car sales tumble 20%; markets hit by bond sell-off – as it happened
(2 months later)
And finally, Wall Street has closed firmly in the red.And finally, Wall Street has closed firmly in the red.
The sharp rises in government bond yields drove the markets lower, although shares did claw their way back from earlier lows.The sharp rises in government bond yields drove the markets lower, although shares did claw their way back from earlier lows.
Marketwatch explains:Marketwatch explains:
The Dow finished down by about 200 points, or 0.8%, to 27,627, but had been down by as many as 357 points, or 1.3% at session lows.The Dow finished down by about 200 points, or 0.8%, to 27,627, but had been down by as many as 357 points, or 1.3% at session lows.
Still, Thursday’s decline for the blue-chip gauge amounted to its worst since July 11, according to FactSet data.Still, Thursday’s decline for the blue-chip gauge amounted to its worst since July 11, according to FactSet data.
Goodnight! GWGoodnight! GW
The scene on Wall Street today:The scene on Wall Street today:
Wall Street is on track for its worst day in several months.Wall Street is on track for its worst day in several months.
The Dow Jones industrial average is currently down 325 points or 1.2% at 26,504 points. Quite a bump, given it hit a record high yesterday.The Dow Jones industrial average is currently down 325 points or 1.2% at 26,504 points. Quite a bump, given it hit a record high yesterday.
Mark DeCambre of Marketwatch says:Mark DeCambre of Marketwatch says:
A drop of that severity would mark the blue-chip benchmark’s worst one-day decline since about May 29, according to FactSet data.A drop of that severity would mark the blue-chip benchmark’s worst one-day decline since about May 29, according to FactSet data.
He too blames bond volatility:He too blames bond volatility:
The slump comes as the 10-year Treasury yield has punched up to seven-year highs at 3.21%, causing investors in stocks to reassess the comparative appeal of equities, considered risky assets, against so-called risk-free government debt.The slump comes as the 10-year Treasury yield has punched up to seven-year highs at 3.21%, causing investors in stocks to reassess the comparative appeal of equities, considered risky assets, against so-called risk-free government debt.
After a bad day, Britain’s FTSE 1oo closed down 91 points or 1.2%, at 7418.After a bad day, Britain’s FTSE 1oo closed down 91 points or 1.2%, at 7418.
The French CAC also suffered, losing 1.5%.The French CAC also suffered, losing 1.5%.
The sell off on Wall Street is gathering pace too:The sell off on Wall Street is gathering pace too:
Dow Jones Industrial Average briefly falls more than 300 points, Nasdaq off nearly 2%, S&P 500 down more than 1% https://t.co/mwOwjxnfGu pic.twitter.com/P8oAHRPLKGDow Jones Industrial Average briefly falls more than 300 points, Nasdaq off nearly 2%, S&P 500 down more than 1% https://t.co/mwOwjxnfGu pic.twitter.com/P8oAHRPLKG
Fiona Cincotta of City Index confirms that rising bond yields (as prices fall) has rattled stock markets:Fiona Cincotta of City Index confirms that rising bond yields (as prices fall) has rattled stock markets:
Bond yields are rising and the stock markets are getting worried.Bond yields are rising and the stock markets are getting worried.
With the US economy powering ahead and the Federal Reserve all but certain to raise interest rates in December and then next year US Treasury yields started rising at great speed this week. Although all the factors like strong economic data and the Fed’s policy signals have been in place for a while now, the absence of trade disputes whiplash and the first signs of worry that US stocks are overbought came together and triggered Thursday’s U-turn in US stocksWith the US economy powering ahead and the Federal Reserve all but certain to raise interest rates in December and then next year US Treasury yields started rising at great speed this week. Although all the factors like strong economic data and the Fed’s policy signals have been in place for a while now, the absence of trade disputes whiplash and the first signs of worry that US stocks are overbought came together and triggered Thursday’s U-turn in US stocks
Greece’s finance minister has been forced to defend his country’s bank performance today after lenders’ shares nosedived on fears of bad loans this week.Greece’s finance minister has been forced to defend his country’s bank performance today after lenders’ shares nosedived on fears of bad loans this week.
Addressing parliament Euclid Tsakalotos said Greece’s high stock of non-performing loans was “totally manageable.” The government, he said was in constant discussion about the best ways of dealing with bad debt holdings amid fears that banks are not stabilising fast enough.Addressing parliament Euclid Tsakalotos said Greece’s high stock of non-performing loans was “totally manageable.” The government, he said was in constant discussion about the best ways of dealing with bad debt holdings amid fears that banks are not stabilising fast enough.
His comments follow an eye-popping sell off of bank shares.His comments follow an eye-popping sell off of bank shares.
On Wednesday the FTSE Athex banks index dropped by as much as 18 percent, with Piraeus Bank shares reeling to their lowest level ever after its CEO let slip in an interview that the lender was considering issuing debt to boost capital.On Wednesday the FTSE Athex banks index dropped by as much as 18 percent, with Piraeus Bank shares reeling to their lowest level ever after its CEO let slip in an interview that the lender was considering issuing debt to boost capital.
If that weren’t bad enough any desire that Athens may have had to return to international borrowing markets after years depending on bailout funds also seems to have been nipped in the bud with spreads on Greek bonds deemed too high to make a market foray in the coming months. After exiting its third and final bailout in August, the leftist led government was hoping the country would return to markets this year.If that weren’t bad enough any desire that Athens may have had to return to international borrowing markets after years depending on bailout funds also seems to have been nipped in the bud with spreads on Greek bonds deemed too high to make a market foray in the coming months. After exiting its third and final bailout in August, the leftist led government was hoping the country would return to markets this year.
Bond markets have woken up to the strength of the US economy, and the likelihood of several more rate rises in the coming quarters.Bond markets have woken up to the strength of the US economy, and the likelihood of several more rate rises in the coming quarters.
So says Will Hobbs of Barclays Smart Investor, who adds that investors shouldn’t panic, despite shares, bonds and many currencies falling today:So says Will Hobbs of Barclays Smart Investor, who adds that investors shouldn’t panic, despite shares, bonds and many currencies falling today:
We suspect the fact that the bond market is taking what amounts to a more positive view on the prospects for US economic growth is a positive for the world economy, emerging markets included. With this in mind, we actually added to emerging market equities this week in our tactical portfolio, taking profit on our long held overweight position in US stocks.We suspect the fact that the bond market is taking what amounts to a more positive view on the prospects for US economic growth is a positive for the world economy, emerging markets included. With this in mind, we actually added to emerging market equities this week in our tactical portfolio, taking profit on our long held overweight position in US stocks.
We still cannot see the next global recession on the horizon. Our main indicators are telling us quite clearly that for the next 6 – 12 months, portfolios should still be focused on stocks, in both emerging and developed worlds, over high quality corporate and government bonds. The run into Christmas will no doubt give us plenty of jarring political and economic headlines to digest, but our view remains that it is the continuing health of the US and global economy that matters most for capital markets.We still cannot see the next global recession on the horizon. Our main indicators are telling us quite clearly that for the next 6 – 12 months, portfolios should still be focused on stocks, in both emerging and developed worlds, over high quality corporate and government bonds. The run into Christmas will no doubt give us plenty of jarring political and economic headlines to digest, but our view remains that it is the continuing health of the US and global economy that matters most for capital markets.
A broad based sell-off swept across Europe today, says David Madden of CMC Markets, triggered by falling bond prices.A broad based sell-off swept across Europe today, says David Madden of CMC Markets, triggered by falling bond prices.
The prospect of four rate hikes from the Federal Reserve in the next 12 months, is driving up US government bond yields. Traders are worried that EM counties will be hit by higher borrowing costs, and in turn it could damage their economies. The Indian rupee has reached another record low, and the Turkish lira is weaker too as investors are fearful we could be heading for an EM crisis.The prospect of four rate hikes from the Federal Reserve in the next 12 months, is driving up US government bond yields. Traders are worried that EM counties will be hit by higher borrowing costs, and in turn it could damage their economies. The Indian rupee has reached another record low, and the Turkish lira is weaker too as investors are fearful we could be heading for an EM crisis.
Global stock markets are a sea of red ink today, as investors fret about heavy losses in the bond market.Global stock markets are a sea of red ink today, as investors fret about heavy losses in the bond market.
Shares are down across Europe, and have also opened sharply lower in America.Shares are down across Europe, and have also opened sharply lower in America.
Britain’s FTSE 100 is flirting with a triple-digit loss, as the drop in car sales adds to the gloomy mood in the City.Britain’s FTSE 100 is flirting with a triple-digit loss, as the drop in car sales adds to the gloomy mood in the City.
Bond prices are also in retreat, triggered by a big fall in US Treasury’s on Wednesday, as investors anticipate hikes in US interest rates to calm its economy.Bond prices are also in retreat, triggered by a big fall in US Treasury’s on Wednesday, as investors anticipate hikes in US interest rates to calm its economy.
Pierre Veyret of ActivTrades says the U.S. bonds sell-off has spooked investors on all continents.Pierre Veyret of ActivTrades says the U.S. bonds sell-off has spooked investors on all continents.
An important sell-off in U.S. Government bonds took place on Wednesday evening, after stronger-than-expected data on both non-manufacturing and private sectors took most of investors by surprise.An important sell-off in U.S. Government bonds took place on Wednesday evening, after stronger-than-expected data on both non-manufacturing and private sectors took most of investors by surprise.
This morning, European traders went back to their desk to see a significant drop during the Asian session.This morning, European traders went back to their desk to see a significant drop during the Asian session.
Newsflash from America: US factory orders have posted their fastest rise in almost a year.Newsflash from America: US factory orders have posted their fastest rise in almost a year.
Manufacturing orders rose by 2.3% in August, faster than expected, led by a rise in aircraft sales.Manufacturing orders rose by 2.3% in August, faster than expected, led by a rise in aircraft sales.
It’s the strongest gain since September 2017, and another sign that America’s economy is looking strong, despite the trade war with China.It’s the strongest gain since September 2017, and another sign that America’s economy is looking strong, despite the trade war with China.
#UnitedStates Factory Orders month-on-month at 2.3% https://t.co/MCO95X647G pic.twitter.com/olZevhPAWk#UnitedStates Factory Orders month-on-month at 2.3% https://t.co/MCO95X647G pic.twitter.com/olZevhPAWk
US August factory orders post largest gain in 11 months https://t.co/Xl1uJ60VxN via @Reuters pic.twitter.com/ukS6cmtzaVUS August factory orders post largest gain in 11 months https://t.co/Xl1uJ60VxN via @Reuters pic.twitter.com/ukS6cmtzaV
If you’re just tuning in, here’s the Press Association’s take:If you’re just tuning in, here’s the Press Association’s take:
Demand for new cars fell by around 20% in September, according to an industry body.Demand for new cars fell by around 20% in September, according to an industry body.
The Society of Motor Manufacturers and Traders (SMMT) said around 339,000 new cars were registered during what is normally one of the industry’s strongest months due to the release of new number plates.The Society of Motor Manufacturers and Traders (SMMT) said around 339,000 new cars were registered during what is normally one of the industry’s strongest months due to the release of new number plates.
Diesel and petrol registrations were down year-on-year, with a modest rise for alternatively fuelled cars such as pure electrics and hybrids.Diesel and petrol registrations were down year-on-year, with a modest rise for alternatively fuelled cars such as pure electrics and hybrids.
The SMMT said the decline was mainly due to changes to the way new cars are tested, with tougher emissions regulations introduced in the European Union.The SMMT said the decline was mainly due to changes to the way new cars are tested, with tougher emissions regulations introduced in the European Union.
The organisation’s chief executive Mike Hawes told BBC Radio 4’s Today programme: “This year we’ve had the first major change in the way you test vehicles - the first change in about 30 years.The organisation’s chief executive Mike Hawes told BBC Radio 4’s Today programme: “This year we’ve had the first major change in the way you test vehicles - the first change in about 30 years.
“That has led to some major challenges in terms of supply because you’ve got to change the entire European model range, put them through the test, and that takes a considerable amount of time.“That has led to some major challenges in terms of supply because you’ve got to change the entire European model range, put them through the test, and that takes a considerable amount of time.
“Some manufacturers have had short supply which has meant sales have been down.” Mr Hawes added that “demand is down a bit” due to a drop in business and consumer confidence due to uncertainty over Brexit.“Some manufacturers have had short supply which has meant sales have been down.” Mr Hawes added that “demand is down a bit” due to a drop in business and consumer confidence due to uncertainty over Brexit.
The EY Item Club believe Brexit worries and weak consumer confidence are weighing on car sales - even setting aside the disruption caused by the new emission test regime.The EY Item Club believe Brexit worries and weak consumer confidence are weighing on car sales - even setting aside the disruption caused by the new emission test regime.
They say:They say:
Private sales could be hampered by consumer purchasing power, which is only improving slowly. Meanwhile, consumer confidence is still relatively fragile with consumers cautious about making major purchases. Indeed consumer confidence fell in September according to the GfK measure.Private sales could be hampered by consumer purchasing power, which is only improving slowly. Meanwhile, consumer confidence is still relatively fragile with consumers cautious about making major purchases. Indeed consumer confidence fell in September according to the GfK measure.
Furthermore, recently higher petrol and diesel prices are hardly the best news for the automotive sector, although they do increase interest in more fuel efficient cars and alternatively fuelled vehicles.Furthermore, recently higher petrol and diesel prices are hardly the best news for the automotive sector, although they do increase interest in more fuel efficient cars and alternatively fuelled vehicles.
Businesses may also be cautious in their car purchases amid significant economic and Brexit uncertainties. Some businesses may choose to delay replacing their vehicles, until the outlook becomes clearer.Businesses may also be cautious in their car purchases amid significant economic and Brexit uncertainties. Some businesses may choose to delay replacing their vehicles, until the outlook becomes clearer.
Our full analysis of the latest #SMMT data - New #car sales plunge 20.5% y/y in crucial month of September as supplies hit by new testing regulations - EY ITEM Club https://t.co/cWGP5cTgpV via @EYNewsOur full analysis of the latest #SMMT data - New #car sales plunge 20.5% y/y in crucial month of September as supplies hit by new testing regulations - EY ITEM Club https://t.co/cWGP5cTgpV via @EYNews
Here’s our news story about the UK car industry’s mensis horribilis:Here’s our news story about the UK car industry’s mensis horribilis:
UK sales of new cars plunged by a fifth in September as new emissions tests caused delivery backlogs, while waning appetite for diesel cars and weaker consumer confidence weighed on demand.UK sales of new cars plunged by a fifth in September as new emissions tests caused delivery backlogs, while waning appetite for diesel cars and weaker consumer confidence weighed on demand.
A total of 338,834 new cars were sold last month, according to figures from the Society of Motor Manufacturers and Traders (SMMT), down 20.5% compared with the same month last year.A total of 338,834 new cars were sold last month, according to figures from the Society of Motor Manufacturers and Traders (SMMT), down 20.5% compared with the same month last year.
September is traditionally a bumper month for sales as consumers rush to buy cars with new number plates.September is traditionally a bumper month for sales as consumers rush to buy cars with new number plates.
However, the SMMT said new and more rigorous emissions testing rules created supply problems and a backlog of deliveries as car manufacturerssuffered delays in getting their cars approved....However, the SMMT said new and more rigorous emissions testing rules created supply problems and a backlog of deliveries as car manufacturerssuffered delays in getting their cars approved....
More here:More here:
Bumper to slumper: New emissions tests choke UK car sales
Last month’s car sales slump is the worst in a decade.Last month’s car sales slump is the worst in a decade.
The SMMT tells us that the last time UK car registrations fell by 20% or more in any September was during the recession in September 2008 (when they shrank by 21.2%).The SMMT tells us that the last time UK car registrations fell by 20% or more in any September was during the recession in September 2008 (when they shrank by 21.2%).
The last time sales fell by over 20% in ANY month was October 2010 (-22.2%), partly because sales in October 2009 had been boosted by a vehicle scrappage scheme.The last time sales fell by over 20% in ANY month was October 2010 (-22.2%), partly because sales in October 2009 had been boosted by a vehicle scrappage scheme.
Bank bosses are also fretting about the impact of a no-deal Brexit.Bank bosses are also fretting about the impact of a no-deal Brexit.
Ross McEwan, CEO of Royal Bank of Scotland, claimed today that a “bad Brexit” could tip the UK into a recession.Ross McEwan, CEO of Royal Bank of Scotland, claimed today that a “bad Brexit” could tip the UK into a recession.
He warned:He warned:
“We are assuming 1-1.5% growth for next year, but if we get a bad Brexit then that could be zero or negative, and that would affect our profitability and our share price.”“We are assuming 1-1.5% growth for next year, but if we get a bad Brexit then that could be zero or negative, and that would affect our profitability and our share price.”
The UK government still owns more than 60% of RBS, following its rescue a decade ago. Its share price is already languishing way below the break-even level.The UK government still owns more than 60% of RBS, following its rescue a decade ago. Its share price is already languishing way below the break-even level.
RBS boss says 'bad Brexit' could tip UK into recession
Thanks to September’s slump, UK car sales have shrunk by 7% during 2018.Thanks to September’s slump, UK car sales have shrunk by 7% during 2018.
UK consumers and businesses have bought 1.91 million new vehicles since the start of the year, compared to 2.06 million at the same time a year ago.UK consumers and businesses have bought 1.91 million new vehicles since the start of the year, compared to 2.06 million at the same time a year ago.
That’s partly due to the 20% contraction in September - usually a big month for new car sales due to the number place change.That’s partly due to the 20% contraction in September - usually a big month for new car sales due to the number place change.
But the decline goes deeper too, and highlights how consumer and business confidence is fragile.But the decline goes deeper too, and highlights how consumer and business confidence is fragile.
Ana Nicholls, automotive analyst at the Economist Intelligence Unit, predicts that sales will bottom out next year, IF a chaotic Brexit is avoided:Ana Nicholls, automotive analyst at the Economist Intelligence Unit, predicts that sales will bottom out next year, IF a chaotic Brexit is avoided:
The EIU’s core forecast is still that the UK will get an EU trade deal in 2021, after a transition period. If that happens, then the current drop in UK car sales should level out in 2019, with some modest growth in 2020-22 that should help to tide the industry over any disruption.The EIU’s core forecast is still that the UK will get an EU trade deal in 2021, after a transition period. If that happens, then the current drop in UK car sales should level out in 2019, with some modest growth in 2020-22 that should help to tide the industry over any disruption.
But the risks of a no-deal Brexit have risen in the past month, and that could make conditions in the auto industry much more difficult.”But the risks of a no-deal Brexit have risen in the past month, and that could make conditions in the auto industry much more difficult.”